Starmer to hand teachers and nurses bumper pay rise
Sir Keir Starmer is poised to hand above-inflation pay rises to teachers and nurses despite warnings that the move may need to be funded by extra taxes or borrowing.
The independent pay review bodies representing 514,000 teachers and 1.36 million NHS workers have both recommended pay rises of around 5.5 per cent.
Labour is understood to have budgeted for a pay rise of only 3pc, and the extra cash “can only come” from either higher borrowing, higher taxes or cuts, according to the Institute for Fiscal Studies.
However, refusing to offer the 5.5 per cent pay rise, or refusing to fully fund it, would put the Prime Minister on a collision course with union bosses who have threatened to strike if they are offered any less.
Sir Keir, who has pledged to “end the chaos” of the Tory government, does not want to risk a row with the unions which could end in large scale industrial action in key public services.
Sir Keir is understood to be open to an above-inflation pay rise for public sector workers, but Downing Street sources said he was not willing to give into union demands at any cost.
Economists said a 5.5 per cent pay deal for teachers and nurses alone would cost the Treasury an extra £3.5 billion. But if the 5.5 per cent figure was replicated across the entire public sector, this could cost an extra £10 billion.
‘There is no fourth option’
Paul Johnson, the director of the IFS said that implementing the pay recommendations “can only come from higher borrowing than they’re planning, higher taxes than they’re planning or cuts in spending elsewhere. There is no fourth option”.
It raises the prospect that the Government will have to break their election promises and find extra cash by raising taxes or higher borrowing after just two weeks in office.
The Labour leader repeatedly said during the election campaign that all his plans would be “fully costed” and that he would not raise taxes on working people aside from those outlined in his manifesto.
Rachel Reeves, the Chancellor, has said she will only borrow to invest as part of her new fiscal rules, pledging her “iron-clad” discipline to balance the books.
It is unclear whether Sir Keir will accept the full 5.5 per cent that the independent pay review body is recommending, or whether he and Ms Reeves will sign off on an amount which is less than this but still above inflation which is currently running at two per cent.
Labour has already rejected demands by some unions for far larger pay rises. Wes Streeting, the Health Secretary, said during the election campaign that he will “not be able to afford” the 35 per cent multi-year pay rise that junior doctors are demanding.
The independent pay bodies recommended the 5.5 per cent pay rise for NHS workers and teachers because the figure is in line with pay rises in the private sector. The average weekly pay of private sector workers rose by 5.5 per cent in three months to May compared with 2023, Commons Library data show.
‘Finances are in a poor state’
When asked during last week’s Nato summit in Washington whether he would give unions asking for above-inflation pay rises what they wanted, Sir Keir said: “No is the answer to the last bit of that question.
“Obviously there are a number of pay settlements to be gone through on an annual basis, but the finances are in a very poor state. I think that is obvious.
“And that’s why we’ve been careful in what we said going into the election, and we’ll be careful what we say coming out of it.”
Downing Street sources insisted he was referring to his refusal to write the unions a blank cheque when it came to their pay demands.
Education and health union chiefs have both pressed for above inflation pay rises, explaining in their submissions to the pay review body that this would help boost recruitment and retention.
Both education and health unions intend to put any pay rise offer from the Government to their members, and if it is rejected they will consider balloting for strike action.
Daniel Kebede, the general secretary of the National Education Union, told the Sunday Telegraph: “If the Treasury intervenes and makes a pay award below 5.5 per cent, that would be highly inflammatory and a strike would be unavoidable.”
He said any pay offer would be used as a basis for negotiations for a much larger multi-year settlement, explaining: “Teachers have lost 25 per cent of pay since 2010 and we are not expecting this all in one go, but over the course of the parliament.”
Mr Kebede added: “This Government has come into power pledging to reset the relationship with the profession and pledging a new deal for working people.
“The onus on them is to avoid [strike] action. The way to do that is to ensure that the award is 5.5 per cent and that it is implemented in full with appropriate funding. And then commit to work with the union to restore the pay offer the course of the parliament.”
Strike action on the cards
Head teachers fear that even if the Treasury signs off on the 5.5 per cent pay rise, they may choose not to fully fund it, meaning that schools would be left to make up the shortfall through their existing budgets.
Pepe Di’Iasio, the general secretary of the Association of School and College Leaders, said it would be a “real problem” if the pay rise is not fully covered by the Treasury, and warned it could lead to classroom budgets being cut to “make up the shortfall”.
Meanwhile a health union source said that while strike action is always a last resort, it would be on the cards “if members rejected any offer”.
He repeated the warnings about the need for any pay rise to be fully funded, saying: “The NHS would find it very difficult to find savings in areas because it is running at full tilt and has been for a while. We would immediately pass that back to the Government and say that not fully funding it isn’t an option.”
A Government spokesman said: “We value the vital contribution the almost six million public sector workers make to our country. The Pay Review process is ongoing, and no final decisions have been made. We will update in due course; however we are under no illusions about the scale of the fiscal inheritance we face.”