By Muvija M and William James
LONDON (Reuters) -British Prime Minister Rishi Sunak sought on Thursday to end months of crippling public sector strikes by offering teachers, doctors and other workers pay increases of 6% and above, but warned it would cost billions that could mean cuts elsewhere.
Sunak faces an election in the next 18 months against a backdrop of the highest inflation of any major economy, a near-stagnant economy and a legacy of scandals and missteps from his Conservative Party’s 13 years in power. Opinion polls put the Conservatives far behind the opposition Labour Party.
The prime minister said he had accepted the recommendations of independent pay review boards on wage rises for public sector workers, stressing that it was a final offer intended to end months of industrial action.
“This is a significant pay award, it’s one of the most significant we’ve had in decades, and it is costing billions of pounds more than the government had budgeted for and that has consequences,” Sunak said.
The package will mean finding an additional 5 billion pounds ($6.55 billion) – 2 billion this year and 3 billion next year – from existing departmental budgets.
“Today’s offer is final. We will not negotiate again on this year’s settlements and no amount of strikes will change our decision,” Sunak said.
Education unions immediately said they would call off planned strikes and recommend accepting the deal. But two unions representing doctors said the offer was unlikely to end strikes.
The pay increases are below Britain’s current 8.7% inflation rate but are aimed at bridging the gap following the country’s worst bout of industrial unrest in more than 30 years.
Junior doctors will now get a 6% pay uplift and a lump-sum pay increase of 1,250 pounds, while teachers would get a 6.5% raise. Police and the military will get similar settlements.
After more than a year of elevated inflation – which at its peak hit more than 11% – the government is struggling to balance the need to end strikes with rising public debt levels.
It has little room for more spending on wages without either hiking taxes, cutting other public services or missing its self-imposed targets to reduce borrowing.
NO NEW BORROWING
Sunak said the pay rises would not push up inflation because there would be no new borrowing or spending to fund the increases. Teachers’ pay rises would be funded by a reallocation of the existing department budget.
Explaining how he would fund the higher salaries, Sunak said measures would include raising a fee paid by international workers to access the country’s health service and the cost of securing a visa to enter Britain would also increase.
Other sources of new funding are likely to be closely scrutinised by trade unions, who have said budgets for public sector services such as hospitals are already very tight.
“The government is putting its departments between a rock and hard place,” said Unite union General Secretary Sharon Graham. “They now have to choose between paying workers a half-decent salary or cutting services in already underfunded public services.”
The British Medical Association, which represents about 45,000 junior doctors in England, said the government’s offer was still a pay cut in real terms.
“Today, it missed a huge opportunity to put a credible proposal on the table to end strikes,” BMA Chair of Council Phil Banfield said. He added that junior doctors, who are in the middle of a 5-day strike, were likely to continue to take further industrial action.
Ministers have repeatedly stressed the danger that increasing wages too far would undermine its inflation-cutting goal and could entrench rising prices.
However, the Bank of England has been more focused on pay in the private sector, which has risen faster than public-sector pay and has a more immediate impact on the prices of goods and services used to calculate consumer price inflation.
Britain’s total debt is just over 100% of GDP, slightly below the average among advanced economies.
($1 = 0.7634 pounds)
(Additional reporting by Kylie MacLellan, David Milliken, Suban Abdulla, Paul Sandle, Farouq Suleiman and Alistair SmoutWriting by William JamesEditing by Kate Holton, Alex Richardson and Frances Kerry)
