Theresa May has poured cold water on calls for an end to public sector pay restraint, telling MPs that Britain must “live within our needs”.
The Prime Minister has faced intense pressure from senior colleagues to end the 1% cap on wage rises, with one minister admitting the Cabinet is split on the issue.
Labour leader Jeremy Corbyn accused her of “recklessly exploiting the goodwill of public servants” by continuing with a policy which delivers a real-terms pay cut to millions of workers at a time when inflation is running at 2.9%.
Mrs May told MPs at Prime Minister’s Questions in the Commons that upcoming recommendations from pay review bodies for teachers, police officers, prison wardens and senior civil servants would be “very carefully” considered.
But she left little doubt her position chimes with that of Chancellor Philip Hammond, who has warned a relaxation of pay restraint would require extra borrowing or tax rises to avoid increasing the deficit.
“Our policy on public sector pay has always recognised that we need to be fair to public sector workers, to protect jobs in the public sector and to be fair to those who pay for it,” said the Prime Minister.
“That is the balance that we need to strike and we continue to assess that balance.”
Restating her support for action to reduce the deficit, Mrs May warned that failure to keep public finances under control could put Britain in a similar position to Greece – a claim dismissed as “preposterous” by Labour, but described by a Conservative source as “a very real threat” if Mr Corbyn had the opportunity to put his policies into effect.
Downing Street aides later insisted that review body recommendations would be considered in the usual way over the summer, following 1% settlements for nurses and doctors earlier in the year.
They declined to say whether the pay bodies’ remit would be altered in letters requesting recommendations for 2018/19, which are due to go out in the coming months ahead of Mr Hammond’s autumn Budget.
Mr Corbyn said there was an “epidemic of low pay”, particularly affecting younger people, and told the PM public sector workers “need a pay rise”.
Mrs May had been able to find £1 billion for Northern Ireland “to keep her own job” by striking a deal with the Democratic Unionist Party, the Labour leader told MPs, adding: “Why can’t she find the same money to keep nurses and teachers in their jobs?”
Labour called on Mr Hammond to give pay review bodies specific instructions to “make a fair pay award” to public sector workers, who endured two years of a pay freeze before the current 1% limit on annual rises came into force in 2013.
Describing the Government as being in “absolute chaos” on the issue, shadow chancellor John McDonnell told the Commons: “The Chancellor has no understanding why our public sector workers are so angry. They are angry because they’ve had enough of seeing tax cuts for the rich and corporations while their pay is being cut.”