In an attempt to bring an end to months of debilitating strikes in the public sector, British Prime Minister Rishi Sunak proposed pay increases of 6% and above for teachers, doctors, and other workers on Thursday. However, Sunak cautioned that these substantial raises would come at a significant cost, potentially necessitating cuts in other areas, as it would require billions of pounds in additional expenditure.
Sunak, who faces an upcoming election within the next 18 months, is confronted with a host of challenges. These include the highest inflation rate among major economies, a sluggish economy, and a legacy of scandals and missteps during the Conservative Party’s 13-year rule. The latest opinion polls indicate that the Conservatives are trailing far behind the opposition Labour Party.
The prime minister emphasized that the proposed pay increases were based on the recommendations of independent pay review boards and constituted a final offer to put an end to the prolonged industrial action. Sunak acknowledged the significance of the pay award, describing it as one of the most substantial increases witnessed in decades. However, he also underscored the financial ramifications, as the government had not allocated sufficient funds for such extensive expenditures.
Implementing this package would necessitate sourcing an additional £5 billion ($6.55 billion) from existing departmental budgets, with £2 billion allocated for the current year and £3 billion for the following year. Sunak reiterated that the offer presented on Thursday was non-negotiable and that the government would not entertain further discussions regarding this year’s settlements, regardless of any strikes that might occur.
Education unions promptly responded to the proposal, announcing the cancellation of planned strikes and recommending acceptance of the deal. However, two doctors’ unions expressed skepticism that the offer would be enough to resolve strikes within their profession.
Although the pay increases fall short of Britain’s current inflation rate of 8.7%, they aim to bridge the gap following the country’s most severe period of industrial unrest in over 30 years. Junior doctors are set to receive a 6% pay uplift along with a lump-sum increase of £1,250, while teachers will see a 6.5% raise. Similar settlements will be provided to police and military personnel.
With persistent inflation for over a year, peaking at over 11%, the government grapples with the challenge of striking a balance between resolving strikes and managing escalating public debt levels. There is limited room for increased wage expenditure without resorting to tax hikes, cuts in other public services, or failing to meet self-imposed targets for reducing borrowing.
Sunak emphasized that the proposed pay rises would not contribute to inflation, as they would not be funded through new borrowing or additional spending. Instead, funding for teachers’ salary increases would be obtained by reallocating the existing department budget. The prime minister outlined various measures to support the higher salaries, such as raising fees for international workers accessing the country’s health service and increasing the cost of securing a visa to enter Britain.
Trade unions are expected to scrutinize other potential sources of new funding, arguing that budgets for public sector services, including hospitals, are already stretched thin. Sharon Graham, General Secretary of the Unite union, expressed concerns that the government was placing departments in a difficult position, forcing them to choose between providing workers with decent salaries or further reducing services in already underfunded public sectors.
The British Medical Association, representing around 45,000 junior doctors in England, criticized the government’s offer, stating that it still amounted to a pay cut in real terms. Phil Banfield, Chair of Council at the BMA, indicated that junior doctors, currently engaged in a five-day strike, were likely to continue taking further industrial action.
While government ministers have consistently warned about the risks of excessive wage increases, citing potential threats to inflation reduction goals and the exacerbation of rising prices, the Bank of England has been more focused on pay in the private sector. Private sector wages have outpaced public sector increases and have a more immediate impact on consumer price inflation calculations.
Britain’s total debt currently stands at just over 100% of GDP, slightly below the average among advanced economies.