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Rishi Sunak is expected to support pay rises of approximately 6% for public sector workers in 2023-24, but with the condition that ministers find significant savings from their Whitehall budgets.
The prime minister has emphasized the need for responsible pay rises that are not funded through increased government borrowing, as this would contribute to inflation and prolong its effects.
Sunak will meet with Jeremy Hunt, the chancellor, to discuss the proposed pay awards for public sector workers, which are typically around 6% this year, as recommended by independent review bodies.
However, the government is insistent that pay increases next year must be more restrained.
“It’s best to get this settled now,” said a senior government official. “But we must make it clear at the start of next year that this level of increase cannot continue. Things will be significantly tighter next year.”
Sunak has been dealing with a series of strikes by public sector workers, including NHS workers, teachers, and civil servants, who are demanding higher pay due to the cost of living crisis.
Junior doctors who are members of the British Medical Association will begin an unprecedented five-day strike, while teaching unions are considering strike ballots that may result in widespread school closures in the autumn.
Sunak’s aides have stated that no final decision on public sector pay will be made until the prime minister meets with Hunt, who has been negotiating with ministers regarding savings in their departmental budgets.
According to sources, ministers have been instructed to find savings between £2bn and £3bn, with negotiations ongoing. Sunak will review the progress upon his return from a Nato summit in Vilnius.
The Treasury is pressuring ministers to delay capital spending programs and, in some cases, increase fees for public services to cover the cost of pay rises without additional borrowing.
If Sunak approves the plans, ministers will publish independent review body reports and endorse their recommendations on Thursday, in the hopes that the proposed pay increases will prevent further strikes.
The reviews will cover police, doctors, dentists, prison officers, armed forces, and senior public officials. Police are expected to receive the highest award, approximately 7%.
NHS staff, including nurses and ambulance crews, have already been offered a 5% wage increase for 2023-24, along with a one-off payment for the previous year.
The government initially proposed a 3.5% pay rise for public sector workers, leaving a significant funding gap that Sunak and Hunt insist must be filled through savings in departmental budgets.
Speaking from Vilnius, Sunak stated, “We will be guided by the principles of fairness and responsibility. Fairness for our public sector workers, so they are adequately rewarded for their hard work, and fairness for taxpayers who ultimately bear the cost of pay increases. We also need to exercise responsibility in our decision-making to avoid further inflationary effects.”
Although the current consumer price inflation rate is 8.7%, Sunak hopes it will decrease to around 5% by the end of the year.
Paul Johnson, director of the Institute for Fiscal Studies, emphasized that £3bn in departmental savings may not be substantial but acknowledged the challenges of constrained savings over a prolonged period.
Johnson also highlighted that Sunak’s endorsement of the review body recommendations is not solely politically motivated, but has economic considerations as well, as the independent panels take into account factors such as recruitment and retention in public services.
On Wednesday evening, Sunak hosted a hog roast for Tory MPs at his Downing Street garden, aiming to boost party morale ahead of three parliamentary by-elections next week.
An anonymous Tory official expressed pessimism about the party’s prospects in Uxbridge, Selby and Ainsty, and Somerton and Frome, stating, “We’re expecting significant losses.”
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