11 July 2023 , 21:30
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Recommended pay hike for nurses, police and troops could be snubbed to curb inflation, Rishi Sunak signalled yesterday.
The Prime Minister indicated he could overrule proposals from independent Pay Review Bodies into how much of a wage hike public sector workers should receive. Unions would react furiously to the Government ignoring the recommendations - particularly when ministers used last year’s reviews to offer staff real-terms pay cuts, triggering a wave of public sector strikes.
The Government is expected to publish its plans next week - and Mr Sunak has pledged to halve inflation this year to about 5%, as one of his top five priorities. The PM said ministers “should not fuel the fire ” of inflation, currently running at 8.7%.
He added: “I don’t want to do anything that’s going to make the situation last longer and make it worse.”
The Prime Minister speaks to journalists during his flight from London to Vilnius (POOL/AFP via Getty Images)Stressing that any salary rises had to be “affordable for the taxpayer”, he insisted the Government needed to “be responsible”.
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“Government borrowing costs are rising, not just for the UK but for governments across the world,” he told reporters as he flew to a NATO summit in Lithuanian capital Vilnius. In that economic context, government has to act responsibly.”
He insisted he was ready to use the “lever” of fiscal policy to bring inflation back down towards its 2% target. The Bank of England is deploying monetary tactics to meet the target by hiking interest rates.
There have been 13 consecutive hikes since December 2021, from a rate of 0.1% to the current 5% base level.
The increases have sent mortgage costs soaring, piling misery on families in the cost-of-living crisis and hitting disposable incomes. Experts warn tax cuts and big pay rises could only come from borrowing extra cash - potentially fuelling inflation.
“Government has to be responsible with borrowing,” said Mr Sunak. “It’s absolutely vital we bring inflation down - government should not fuel the fire by excessive borrowing at a time when that would just make the situation worse.”
He also signalled there would be no pre-election tax cuts - setting him on a collision course with backbench Tory rebels. Hard-right Conservatives believe slashing taxes months before voters go to the polls could trigger a surge in support for the Government.
But critics claim such a move would be irresponsible and risk stoking inflation. "The Chancellor and I are completely united on wanting to reduce taxes for people. Of course we are, we're Conservatives,” claimed the PM.
“But the number one priority right now is to reduce inflation and be responsible with government borrowing. That is absolutely the overriding economic priority and that takes precedence over everything else.
“So, given the context we face, we are going to make sure that we bring inflation down, and we don't do anything to make the situation worse or last longer.”