Final orders for pay awards

Millions of public sector workers are to receive pay rises of between 5% and 7% which the Prime Minister declared are both fair and final. Yet big questions remain over where the money will come from and whether the latest deal is enough to stop industrial action.

At a special Downing Street press conference today, Rishi Sunak said that he had accepted recommendations made by the pay review bodies in full, meaning police and prison officers will receive the most with a 7% pay rise, while teachers and junior doctors will get a 6.5% and 6% rise respectively.

Sunak is talking tough and acting tough, insisting there will be no more discussions on pay. “We will not negotiate again on this year’s settlements and no amount of strikes will change our decision,” he warned. “The Government has not only made today’s decision on pay. We’ve backed the NHS with record funding, delivered the first ever, fully funded long-term workforce plan and met the BMA’s number one ask of Government, with a pensions tax cut worth £1 billion.”

The PM added: “So, we should all ask ourselves, whether union leaders – or indeed political leaders – how can it be right to continue disruptive industrial action? Not least because these strikes lead to tens of thousands of appointments being cancelled – every single day and waiting lists going up, not down.”

What will public sector workers make of the pay award?

With inflation running at 8.7%, this is not an inflation-busting pay rise – the original demand of all those taking to the picket line. Even so, following the announcement, the education unions said they would now put the offer to their members, and would recommend they accept it. 

But the British Medical Association has already rejected the offer which comes on the day that junior doctors in England have kickstarted their longest strike in NHS history, lasting until Tuesday. Sunak’s new offer of a 6% pay rise is a little better than the 5% figure which failed to stop the latest strikes, but it’s a far cry off the 35% doctors are currently demanding – to reverse 15 years of pay erosion. The BMA will also be mindful of the fact that the Scottish government has offered doctors a pay rise of 12.4% this year. 

Strikes aside, another key concern is how these new pay rises will be funded. 

Sunak said today that it won’t be done through increasing taxes – welcome news to many given Britain’s tax burden is already at a 70 year high.

Yet Hunt has insisted: “We won’t fund any public-sector pay awards through additional borrowing.”

The new wages award comes as the ONS reports that Britain’s economy shrank by 0.1% in May after economic activity declined following three bank holidays, including King Charles’s coronation. The ONS says that gross domestic product (GDP) fell on the month, after growth of 0.2% in April. There were falls in manufacturing, energy generation and construction activity because of the days off. But surprisingly, the UK’s pubs, bars and restaurants also saw lower consumer spending compared to a much stronger April. 

In further gloomy news, the Office for Budget Responsibility (OBR), the Treasury’s spending watchdog warned that the UK’s finances are in a “very risky” position, with debt on an “unsustainable path”, forecast to surge to more than 300 per cent of gross domestic product in 50 years. 

Yet no extra borrowing or tax rises begs the question, where will the money for these pay rises come from? 

Sunak is asking government departments to find the cash from within existing budgets – meaning they will face a £3 billion squeeze on their budgets. This won’t be an easy task for already overstretched public services. 

In schools, the Institute for Fiscal Studies has warned that prioritisation of pay will mean “fewer teachers and teaching assistants or fewer textbooks and school trips.”

And NHS leaders have said it as “risible” to expect them to fund pay rises from existing budgets, calling it “a complete abandonment of reality” to claim it could be done without cutting services. Hospital bosses say they have been told to find cost savings of 6 per cent this year, double the normal efficiency targets.

Ironically, the current industrial action over pay will only further eat into NHS resources, rendering the eventual task of finding extra money to fund pay rises from within existing budgets even trickier. According to Sir Julian Hartley, chief executive of NHS Providers, the last junior doctors strike cost the NHS around £100m. Which rather suggests that Sunak’s tough talk about a final offer should be taken with a pinch of salt. 

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