Treasury gets unexpected PS30bn boost in public finances. Treasury foresees low risk settlement benchmark.
Prime Minister Rishi Sunak of the UK is looking into a 5% pay increase for public-sector workers in order to stop an escalating wave de strikes following an unexpected PS30bn windfall for Treasury.
The Royal College of Nursing called off the 48-hour strike that was due to begin next week in England. This is a sign of a shift of mood following months of strife.
In a private memo, the Treasury indicated that there is a low risk of setting a benchmark to ensure protracted high-pay growth in the private sector.
Official figures had shown that public borrowing was likely PS30bn less than expected. This is due to factors like high tax receipts and low public investments.
As he seeks out to end the industrial action which has dominated politics in his tenure, the prime minister has the opportunity to offer better pay offers because of the improved outlook for public finances. Particularly nurses have received widespread support from the public.
Sunak’s allies claimed that it took several months for the two sides to “understand one another’s position”, but the prime minister now wants to take decisive action to end the strikes.
Gillian Keegan, education secretary, also invited teaching unions into “substantive formal discussions” about pay, conditions, and reform. However, only if the National Education Union cancels planned walkouts next week. NEU, the largest sector union, stated that it wasn’t ready to end its strikes because the 3 percent pay increase proposal it had was not sufficient.
Government insiders said ministers considered a pay offer of around 5% for public sector workers next fiscal year, as well as a backdated payment to sweeten it, even though the headline figure for next fiscal year is lower than the forecast 5.5% inflation.
Jeremy Hunt, chancellor, stated that pay increases were recurrent and public expenditure restraint remained vital, but added that: “We understand how difficult it can be for people on the frontline who’ve experienced real-terms reductions in their wages.”
On Tuesday, eight public sector pay review boards received formal 2023-24 submissions from government departments. These included areas such as the NHS, police, and prison staff.
According to current Treasury allocations, they said that they couldn’t afford a 3.5 percent pay increase in the year beginning in April. All public sector workers would need to be paid an additional PS3.7bn per year for a 1.5 percentage point increase.
Hunt’s aides insisted that any increase in pay above 3.5% would need to be paid from the existing budgets of each department, such as efficiency savings.
Hunt, however, has increased departmental budgets in the past to meet cost pressures. He gave the NHS PS6.6bn more over two years, and added PS4.6bn to England’s schools budget in his Autumn Statement.
The Unite union represents ambulance workers, who have rejected a higher salary offer from the Welsh government. In Scotland, the RCN rejected a similar pay offer before offering an improved offer to its members.
Rachel Harrison, the national secretary of GMB union, described government’s offer to talk with the RCN — exclusions other health unions — and as a “backroom deal” and “tawdry example ministers playing divide-and-rule politics with peoples’ lives.”
Wes Streeting, Labour’s health spokesperson, said that if the government had agreed to these talks two years ago, they could have prevented 140,000 appointments from being cancelled due to strike action.
The government’s Tuesday announcement of a 1.5 percent increase in public sector pay would still be well below the windfall in public finance.
The figures surprise economists and Treasury. In figures , the Office for National Statistics reported that the public sector had a PS5.4bn surplus for January. This is far higher than the PS7.8bn deficit predicted by Reuters economists.
The public sector borrowed PS116.9bn in the financial year ended January. This figure is PS30.6bn lower than the forecast by the Office for Budget Responsibility (the UK’s official watchdog).