Chancellor Rishi Sunak has hinted next week’s spending review will include a public sector pay freeze, but insisted it will not lead to a return to austerity.
He is expected to unveil billions in extra funding for long-term infrastructure projects and coronavirus support measures and ruled out raising taxes.
But he failed to quash rumours of a pay freeze for many public sector workers under questioning on Sky’s Sophy Ridge on Sunday, saying it was ‘entirely reasonable’ to consider pay policy in the context of the Covid-battered economy.
It’s believed NHS medical workers will be exempt from any freeze.
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Asked to confirm the pay freeze, he told the programme he ‘cannot comment on future pay policy’, but added: ‘When we launched the spending review I did say to departments that when we think about public pay settlements I think it would be entirely reasonable to think of those in the context of the wider economic climate.
‘I think it would be fair to also think about what is happening with wages, with jobs, with hours, across the economy, when we think about what the right thing to do in the public sector is.
He suggested the multibillion spending boost and lack of tax hikes meant the review would not amount to a return to the deficit reduction-focused spending policy that dominated the last decade.
‘You will not see austerity next week, what you will see is an increase in Government spending, on day-to-day public services, quite a significant one coming on the increase we had last year.
The chancellor has nonetheless said public finances will need to be put back on a ‘sustainable path’ over time as net government debt climbed over £2 trillion for the first time ever this week.
In an interview with Times Radio he suggested cuts could be made when ‘the fog of enormous uncertainty is lifted’, saying now was not the ‘appropriate’ time.
The £200 billion of government support aimed at mitigating the effects of the pandemic, one of the most generous packages seen worldwide, has mostly had to be financed through borrowing.
Shadow Chancellor Anneliese Dodds is expected to use a speech on Monday to urge Mr Sunak to call off the pay freeze, accusing him of forcing public sector workers to pay for his ‘irresponsible choices and unacceptable delays’.
She is set to say the plans will make firefighters, hospital porters and teaching assistants ‘worried about making ends meet ahead of Christmas’ and mean ‘they’ll cut back on spending and our economy won’t recover as quickly’.
Her colleague, shadow business minister Lucy Powell told Sophy Ridge the move would be ‘an absolute kick in the teeth for them after what has been a horrendous few months and what will still be a difficult few months to come’.
Frances O’Grady, the head of the TUC confederation of trade unions, urged ministers to rule out the freeze out of a ‘sense of fairness’.
She told the programme: ‘We saw ministers join millions of us clapping firefighters, refuse collectors, social care workers – I don’t think this would be the time to reward them with a real pay cut.’
‘If you want to motivate a workforce when we are still facing a second wave of a pandemic, and we’re going to have a tough winter – we all know that – the last thing you do is threaten to cut their pay.’
The extra Covid-related spending includes £3 billion to help the NHS recover from the pandemic, with £1 billion dedicated to slashing through the backlogs of checks, scans and operations delayed due to the virus.
Mr Sunak will also lay out £100 billion of long-term spending aimed at making the UK’s energy infrastructure greener and improving transport links.
He is also tackle issues with government spending criteria which are thought to be biased in favour of the south east of England.