UK finance minister Rachel Reeves has signalled a willingness to give almost 2 million public sector workers a pay rise above the current inflation rate in an effort to avoid widespread public sector strikes. The move comes after two pay review advisory bodies recommended a 5.5% pay rise for 460,000 teachers and 1.4 million National Health Service staff.
While recognising the value of public service workers, Reeves expressed concern about the costs associated with lengthy disputes with unions and challenges in recruiting new staff. The Labour Party, which won a significant majority in the general election earlier this month, has promised a decade of “national renewal” without raising income tax, corporation tax or value-added tax rates.
The Institute for Fiscal Studies estimates that implementing the recommended pay rises could cost around £3 billion ($3.88 billion), with the UK’s inflation rate currently around 2%. Reeves, the country’s first female finance minister, assured that the government would ensure that fiscal responsibilities are met if these pay rises are approved.
To finance the proposed rise, the government should consider raising taxes, increasing borrowing or reducing spending elsewhere, according to the IFS. Reeves plans to outline his strategy for public sector pay deals and announce the date of the next budget by the end of this month.
Reuters contributed to this article.
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