Big public sector pay increases could fuel inflation, ministers warned

·2 min read
Simon Clarke stressed the need for caution as he addressed the Cabinet - Leon Neal/Getty Images
Simon Clarke stressed the need for caution as he addressed the Cabinet - Leon Neal/Getty Images

Cabinet ministers were on Tuesday warned not to sign off public sector pay increases that could fuel inflation.

Simon Clarke, the Chief Secretary to the Treasury, briefed the Cabinet about the dangers of soaring inflation and taking decisions that could escalate the situation.

One minister present told The Telegraph that inflation was now “economic public enemy number one”, with knock-on impacts on the chance of major new public spending plans.

A string of independent public sector pay bodies are expected to put forward recommendations for pay increases over the coming weeks, but the Government will ultimately choose salaries for public sector roles such as doctors, teachers and civil servants.

Inflation hit nine per cent last month, meaning public sector unions are expected to push hard for major increases and warn of real-term wage cuts if they are not delivered, but Mr Clarke stressed the need for caution as he addressed the Cabinet.

The official Number 10 readout of the meeting said: “The Prime Minister said the public were understandably anxious about global cost-of-living pressures and that the Government would continue to support those most in need.

“The Government has already promised to increase public sector spending and is awaiting decisions by the public sector review bodies. However, ministers made clear that the risk of triggering higher inflation must be part of considerations when deciding pay awards this year.”

One minister said: “We will focus on inflation, which is economic public enemy number one. If we get it back to a manageable level as soon as possible, that is a really major positive contribution to helping people with the cost of living.”

But there was a critical response from trade unions, with Paul Nowak, the TUC deputy general secretary, saying: “These claims are nonsense. Making sure people can afford to pay their bills and put food on the table is not going to push up inflation. Inflation is being driven by rising energy costs, not pay demands.

“Key workers in the public sector have endured a decade of wage cuts and freezes. At a time when staff shortages are crippling frontline services, this would be a hammer blow to workers.”