A Treasury minister has said there is a cost to failing to reach agreement on public sector pay in the face of proposed pay rises to combat inflation, which cost billions of pounds.
But speaking on Sky News’ Sunday Morning with Trevor PhillipsJames Murray insisted the Labor government’s fiscal rules were “non-negotiable” as he refused to question whether his boss, Chancellor Rachel Reeves, would meet the fluctuated increase of 5.5% recommended by independent salary review bodies.
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The proposed above-inflation rise for teachers and around 1.3 million NHS staff, reported by The Times, is well above the amount the government is thought to be preparing for and will cost around £3 billion.
Sir Keir Starmer’s government could need up to £10 billion to cover that pay rise if all public sector workers received the 5.5% rise, an economist has warned.
The government is currently believed to have budgeted for an increase of between 1% and 3%, with inflation currently at 2%.
Speaking to the BBC, the chancellor said that “people will not have to wait long for a decision”.
She said: “There is a cost in not establishing, a cost of further industrial action and a cost in terms of the challenge we face in recruitment
“We will do this appropriately and make sure the values add up.”
This was echoed by Murray, who told Phillips: “Let us be clear that there is a cost, obviously, to responding to the recommendations of pay review bodies.
“But I think what the chancellor was saying is that there is also a cost in not reaching an agreement, because then you run the risk of union action.
“There are long-term problems in terms of recruiting and retaining teachers, people working in the NHS and police officers, and so on.
“So, you know, we need to define our path forward.
“The appropriate process is to consider the recommendations of pay review bodies and then define our response in light of public finances and public expenditure heritage.”
He added: “It will be within our fiscal rules. And as the Chancellor said, throughout the campaign and absolutely in office, our fiscal rules are non-negotiable. And so the answer will be within those parameters, but obviously the right way to do it .
“Again, the appropriate way to do this is to look at the recommendations of pay review bodies and then present a response to parliament in the context of public finances.”
Ignoring the recommendations of salary review bodies could result in a strike, according to Daniel Kebede, general secretary of the National Education Union.
Several different public sector groups have been involved in collective action over pay in recent years, including junior doctors who agreed to start formal talks with the government last week in a bid to resolve their 20-month dispute.
A previous round of teacher strikes ended in July 2023 after trade unionists accepted the government’s offer of a 6.5% salary increase.
Kebede noted that the new Education Secretary, Bridget Phillipson, had “worked very hard” to improve relations with the teaching profession, but said: “It would be highly problematic for the Treasury to intervene and not implement a 5.5% salary premium.
“We would absolutely like to avoid a strike, but it would seem almost inevitable if the Treasury were to intervene.”
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