Rachel Reeves hints at public sector wage increases above inflation

Chancellor Rachel Reeves has said the government will “make sure the math works” by giving public sector workers pay rises above inflation.

Reports first appearing in The Times suggest that independent pay review bodies have recommended a 5.5% increase for teachers and around 1.3 million NHS staff.

Speaking to the BBC, the Chancellor said that public sector workers were important to her and that “people will not have to wait long for a decision.”

“There is a price for not agreeing, a price for further industrial action and a price in terms of the challenges we face in recruiting,” she told Sunday With's Laura Kuenssberg, stressing that her spending rules were “non-negotiable”.

“We will do it properly and make sure it all adds up.”

However, the ministers did not want to comment on whether they would implement the recommendations of the pay review bodies.

Finance Minister James Murray said the Chancellor of the Exchequer would set out the government's response to the recommendations at the end of the month, taking into account the state of the public finances, adding that it would not be “helpful” if he “preempted the process we are going through”.

Paul Johnson, director of the influential Institute for Fiscal Studies, said the pay rises could cost an additional three billion pounds for schools and the national health service alone.

He told the BBC: “In terms of costs, there is no specific amount set aside for schools in the budget. It is probably one or two per cent, but certainly not 5.5 per cent. So we would certainly be looking at at least a billion pounds in additional costs for schools compared to what is currently expected.”

“And across the NHS the figure is at least double that if the proposals for the NHS are similar, which it seems they could be.”

During the debate on public sector pay on Sunday morning, the Chancellor of the Exchequer accused former Conservative ministers of “running away” from a decision.

She specifically mentioned former Education Secretary Gillian Keegan and said the panel's recommendations on the teacher pay review had been on her desk for “months”.

“She didn't do anything about it. She didn't publicise it and didn't say how she would respond to it,” Ms Reeves said.

“They called elections, they failed to make the difficult decisions, they ran away from them, and now it's up to us to sort things out and pick up the pieces.”

Ministers repeatedly accused their predecessors of leaving them the worst budget legacy since the Second World War.

But former Chancellor of the Exchequer Jeremy Hunt told Laura Kuenssberg on Sunday that this was “absolute nonsense” and aimed at preparing the ground for tax increases.

He said: “Until a few weeks ago, I was looking at the same numbers that Rachel Reeves is looking at now.

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“It is absolutely clear: if you are prepared to exercise restraint on public sector pay, as we did last year, if you are prepared to be ambitious on public sector productivity, as I did in the Budget, and if you are prepared to deliver welfare reforms that were glaringly absent from the King's Speech – if you do those three things, it is perfectly possible to balance the books so that taxes do not have to be raised.

“I think it's clear from the first two weeks of this Labour government that they are not prepared to make these difficult decisions.”

Hunt also denied shirking decisions on public sector pay, saying: “I can be criticised for many things, but I don't think people would accuse me of not making tough and difficult decisions.”