Treasury ‘prepared for major pay deal’

United Kingdom Treasury documents have revealed the Government is prepared for a pay deal which gives its 5.5 million public sector workers increases beyond the current rate of inflation.

Negotiations with unions are under way, with the Treasury advising public-sector pay review bodies, which make the final recommendations, to use its two per cent inflation target as a guide rather than the Bank of England’s forecast of 5.75 per cent for the year.

However, figures buried in Office for Budget Responsibility (OBR) documents reveal Government spending plans assume the public sector wage bill will increase by 6.7 per cent in the fiscal year starting next month.

A pay rise of that amount would almost certainly be enough to match the annual rate of inflation, even after accounting for the rise in energy prices since Russia’s invasion of Ukraine.

Public sector employers and unions are currently locked in pay negotiations, with April the key month for settlements. Staff want wages to keep up with surging inflation, and a shortage of workers is giving them rare bargaining power.

In February, the Government proposed a three per cent pay rise for the National Health Service’s 1.3 million staff.

Public Service union, Unison said the “tight-fisted” offer was a wage cut in all but name.

The National Health Service’s pay review body is now considering what to recommend.

OBR projections suggest the big increase in Departmental spending announced in the October Budget might be enough to meet Government plans for Public Service provision and increase pay significantly for public sector workers, who have been subject to freezes and tight pay-rise caps in recent years.

A Treasury spokesman played down the OBR forecasts, saying an assumption of pay bill growth could not be derived from them.

“Pay increases need to be proportionate to the pay rises in the wider economy, balanced with the need to manage the country’s long-term economic health and protect public-sector finances,” a spokesperson said.

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