Furious unions gear up for MORE strikes in hospitals and schools over pay as ministers mull 2% cap

Union leaders warned of a fresh wave of strikes affecting hospitals and schools today amid reports public sector workers will face a real-terms pay cut next year. 

Jeremy Hunt and Rishi Sunak are believed to be considering capping rises for thousands of workers at 2 per cent in the 2023/2024 financial year in a bid to save money.

The pay restraint, which would be a real-terms cut to wages if inflation remains higher at the time, is expected to be announced by the Chancellor in his November 17 Autumn Statement, the Times reported.

But such a move is likely to spark more strike action, with industries already walking out after rejecting pay increases far above 2 per cent.

Mr Sunak gathered his Cabinet today as he braces Britons for years of higher taxes and austerity to fill the ‘eye-watering’ £50billion black hole in the government finances.

The PM and his senior team took stock after he agreed with Chancellor Jeremy Hunt that it is ‘inevitable’ all taxpayers will face a higher burden.

But they face a fight with Unions to get through any wide-ranging public sector cuts. Kevin Courtney, the joint general secretary of the National Education Union, said: ‘Schools will not be able to recruit teachers. They will not be able to hold on to support staff. The same will happen in the NHS. 

‘We have to say NO to the Government. If you Union is balloting you should say YES to action.’

And Pat Cullen, the general secretary and chief executive of the Royal College of Nursing, warned the cap would be ‘bad politics and bad economics’.

‘Today’s ministers are stuck on yesterday’s ideas of giving yet more pay cuts – our members have had a decade of this, they’ve paid the price and enough is enough,’ she said.

‘Only last week new research we commissioned showed experienced nurses effectively are working one day a week for free because of a decade of real-terms pay cuts.

‘One solution to the nursing workforce crisis, which is making care unsafe, is to recruit and retain more staff by paying them fairly.

‘Our strike ballot closes tomorrow and we fully anticipate its result will reflect the voice of nursing loud and clear on this issue.’

And Unison general secretary Christina McAnea added: ‘Holding down pay for public sector staff is the worst possible response. This shows a government with no ideas, nor a grasp of the reality of people’s lives.

‘The NHS, care and other key services already have a workforce crisis. Many more staff will walk if they know there’s no prospect of a decent pay rise for years.

‘That means patients will wait longer, older people won’t get the care they need, crime rates will rise and education will suffer. Everyone suffers if communities don’t have basic services.’

Mr Sunak told ministers this morning that ‘difficult decisions’ are coming, but stressed the NHS would be ‘prioritised’ for funding – while making clear that in return the health service will need to accept reform.   

The assessment came after the premier and Mr Hunt concluded that soaking the rich and taking an axe to public spending in the Autumn Statement will not be enough to balance the books.

Instead, broad-based tax rises will be needed, with speculation that thresholds will be frozen for longer to drag millions of people deeper into the system by ‘stealth’. 

The government is expected to stick to manifesto pledges not to hike the headline rates of income tax, national insurance or VAT.

Meanwhile, public sector workers could face a 2 per cent cap on pay rises next year, far below the expected rate of inflation, as the government seeks to split the fiscal tightening 50-50 between trimming spending and raising revenue. 

Mr Hunt is meeting ministers this week to discuss how to trim their departments, with a potential flashpoint as Defence Secretary Ben Wallace pushes for spending on the military to reach 3 per cent of GDP by 2030.

A Treasury source said: ‘It is going to be rough. The truth is that everybody will need to contribute more in tax if we are to maintain public services.

‘After borrowing hundreds of billions of pounds through Covid-19 and implementing massive energy bills support, we won’t be able to fill the fiscal black hole through spending cuts alone.’

They added that Mr Sunak and Mr Hunt are committed to protecting the most vulnerable in society during the ‘difficult period’ ahead. 

‘You will need spending cuts to fill that black hole, but unfortunately you need tax rises too,’ an insider said. 

‘The focus will be towards the upper end of the income scale but the truth is, there are not enough people there – everybody will have to pay more. Everyone will feel the pain.’

The warning came as the Resolution Foundation think-tank said Mr Sunak and Mr Hunt face an ‘unpalatable menu’ when it comes to rebalancing finances.

With a deteriorating economic outlook and the legacy of last prime minister Liz Truss’s disastrous mini-Budget as a backdrop, it suggests the Government will need to find at least £40billion — likely through a combination of tax rises and spending cuts.

The think-tank said the Office for Budget Responsibility (OBR) could predict a recession next year, with GDP forecasts cut by up to 4 per cent by the end of 2024.

Unemployment could also rise by around half a million, the report suggests, with the weaker economic outlook bringing borrowing up by around £20billion a year by 2026-2027.

‘The Government has a little over two weeks to finalise its plans to repair its economic credibility and the sustainability of the public finances,’ said James Smith, research director at the Resolution Foundation.

‘While the recent focus has been on conditions improving post-Trussonomics, the central picture remains one of a weaker growth, higher borrowing costs and expensive tax cuts that have left a fiscal hole of at least £40billion to fill.’

VAT, national insurance and income tax hikes are all understood to be off the table given previous pledges and Conservative Party manifesto commitments, while increasing fuel duty is likely to be seen as too risky in the middle of a cost of living crisis.

It means the Treasury is likely to focus on ‘stealth’ measures such as freezing income tax thresholds for another two years. 

That would raise as much as £5billion by dragging up to three million workers into higher tax bands.

The income tax and national insurance thresholds were expected to be frozen until 2026, with the new plan extending this by at least two more years. 

It comes after it was revealed that Mr Hunt is looking at a 50:50 split between spending cuts and tax rises in the Autumn Statement, which was due to be delivered yesterday but was delayed so the new PM could get ‘under the bonnet’ of the plans.

By contrast, George Osborne’s austerity package after the financial crash was 80 per cent spending cuts and 20 per cent tax rises. 

Mr Wallace confirmed today he will have a meeting with Hunt this week to discuss what the autumn budget will mean for his department.

Appearing before Lords International Relations and Defence Committee, Mr Wallace said: ‘Obviously we are in the middle of an IR refresh that John Bew… is going to produce, and obviously contributions from my department and others will be made towards it, hopefully publishing sometime toward the end of this year.

‘But obviously, we’re having to take… account of the economic challenges at the moment, and we’ll wait to see what the Chancellor’s budget produces. I myself will have a meeting with the Chancellor this week around what that means for my department.’

While in office, ex-PM Liz Truss commissioned an update to the Integrated Review (IR) of defence and security, which was published in March 2021.

Unveiled by her predecessor Boris Johnson, it had seen the size of the Army reduced by 9,500 and a third of its ranks scrapped.

The update was expected to be published by the end of 2022.