Teachers and NHS workers could get inflation-busting pay hike, Rachel Reeves hints

Public sector workers may be rewarded with above-inflation pay rises in the coming weeks, Rachel Reeves has hinted.

The Chancellor has warned that failing to bring a wave of teacher and NHS strikes to an end could be costly. In an interview with the BBC’s Laura Kuenssberg, she will claim the Tories “just ran away” by calling an early election – meaning they could avoid tough decisions.

Independent pay review bodies have recommended teachers and some NHS staff are awarded a 5.5% rise. – well above the 2% inflation rate in May and June. Asked what she’ll do, Ms Reeves said: “I really value public service workers, in our schools, in our hospitals, in our police as well…

“There is a cost to not settling, a cost of further industrial action, and a cost in terms of the challenge we face recruiting.” She went on to tell Ms Kuenssberg that pay hikes will only be done “in a proper way and make sure the sums add up”.

The Treasury boss said her spending rules are “non-negotiable”. A decision will be made on public sector this month, the BBC reports, with Ms Reeves saying “people won’t have long to wait”.

It is estimated that offering teachers and certain NHS staff a 5.5% rise could cost the Government £3billion. Ministers are expected to make a decision on recommendations from public sector pay review bodies by the end of the month, setting salary levels for staff, including NHS staff, teachers, police officers and the armed forces.

Health staff were due a pay rise in April, and lower paid Band 2 roles like nursing assistants and domestic support workers currently earn only a penny above the minimum wage. Ms Reeves could be forced to find an extra £7billion-per-year to foot the bill, to prevent millions of public sector staff from slipping further behind their private sector counterparts, according to the Institute for Fiscal Studies (IFS).

Setting her sights on the Conservatives, who were swept from office at the start of the month, she claimed they “weren’t willing to make tough decisions, and they just ran away”. She pointed out that no ruling had been made on teacher pay, while the prison crisis was allowed to build up on Rishi Sunak’s watch.

Keir Starmer signalled last week that unions risk disappointment if they demand above-inflation settlements, saying the public finances were in a “very poor state” It is understood Mr Starmer was not ruling out above-inflation pay bumps, but he is not expected to be able to match the demands of unions in full.

Ben Zaranko, from the IFS, told the Mirror: “The key thing is the pay review recommendations are very likely to exceed the current rate of inflation. They are also very likely to exceed what departments have budgeted for.”

Mr Zaranko went on: “This is a bit of a hospital pass from the last Government. They could have dealt with this before the election. The school year starts in September, heads might be starting the year not knowing how much they are paying their teachers. Running things to the wire has consequences.”

Unison head of health Helga Pile said: “Health workers will be hoping they’ll know how much they’re getting this year before the end of the month. NHS staff were due a wage rise in April, but the previous government failed to deliver it on time. Pay is key to solving the staffing crisis and getting patient waits down.”

Ms Reeves announced that the Government is also set to carry out a review of pensions, stating: “People who make sacrifices and save every month to put something aside for their retirement, they deserve better than the returns they’re getting on those savings today.”

She wants to loosen rules so that money sitting in pension funds can be used more easily to invest in UK firms. She said: “If we could unlock just 1% of the money in defined contribution schemes – and invest that in more productive assets [and] fast-growing British companies – that’d be £8bn to help finance growth and prosperity and wealth creation here in Britain.

“That’s why there’s an urgency here from this government, unlocking that investment for our economy and delivering for working people who make big sacrifices but at the moment are being let down by the pensions industry.”

The full interview will be shown on Sunday with Laura Kuenssberg at 9am on BBC One and iPlayer.