14/01/2012 08:40 GMT | Updated 15/03/2012 05:12 GMT

Ed Balls Sparks Union Fury With Warning Over Public Sector Pay

A warning by the shadow chancellor that Labour would not reverse the freeze on the pay of public sector workers has raised the prospect of unions considering quitting the party, it was disclosed today.

Ed Balls sparked fury among officials of unions affiliated to Labour when he said in a major speech that public sector pay restraint was "inevitable".

Unions representing millions of teachers, nurses, council staff, civil servants and other public sector workers are embroiled in a bitter dispute with the Government over changes to pensions and are also campaigning against a decision by Chancellor George Osborne to cap pay to 1% a year.

Mr Balls said in his speech to the Fabian Society: "However difficult this is for me, for some of my colleagues and for our wider supporters, we cannot make any commitments now that the next Labour government will reverse tax rises or spending cuts, and we will not.

"Pay restraint in the public sector in this parliament would have been necessary whoever was in government. But George Osborne's economic mistakes mean more difficult decisions on tax, spending and pay. It is now inevitable that public sector pay restraint will have to continue for longer in this parliament.

"Labour cannot duck that reality - and we won't. Jobs must be our priority before higher pay."

A senior source at one of Labour's biggest affiliates, said it was now inevitable that union conference this summer will vote on whether to remain affiliated to the party.

"Let the taxpayer foot the bill is the likely outcome," he told the Press Association. "This is not an alternative economic approach - it is pure balls. It guarantees that Labour will lose the next election.

"There is no hope, not even a word about tax evasion and avoidance.

"With all three parties now offering identical austerity, what is the point in being affiliated and having the responsibility of funding one of them?

"We don't even get to be consulted on major policy issues. The union conferences in the summer are sure to vote on affiliation."

Bob Crow , leader of the Rail Maritime and Transport union, which is not affiliated to Labour, accused Mr Balls of betraying the party's union supporters.

"By lining up with the Tory-led coalition on the assault on public sector pay, Ed Balls will today sign Labour's electoral suicide note as he alienates his core voters in their millions," he said.

"The idea that the public sector staff who make this country tick are going to head to the polls and vote for a party that supports up to a 20% cut in their living standards, while the spivs and speculators who caused the crisis are laughing all the way to the bank, is a sick joke and a total betrayal of trade union members who fund the party."

Unions formed Labour and now supply around 90% of the party's funding.