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Government Accused Of 'Shambles' Amid Confusion Over Public Sector Pay Cap

Labour has accused the Government of a "shambles" over public sector pay, amid confusion over the future of the 1% cap on annual rises.

Hopes were raised that the long-standing cap was set to be scrapped, after a senior Number 10 source briefed reporters that Prime Minister Theresa May accepted voters were "weary" of austerity and was ready to listen to recommendations from the independent bodies that review public sector pay.

Decisions would come in Chancellor Philip Hammond's Budget in the autumn, he indicated.

And Defence Secretary Sir Michael Fallon became the latest in a string of ministers to suggest that the Government will have to consider whether to persist with the cap, which is currently due to remain in place until 2019/20.

But the PM's official spokesman later played down suggestions that a review of the cap was in the offing, insisting that "the policy has not changed" - a line which was echoed by the Treasury.

The developments came as MPs prepared to vote on a Labour amendment to the Queen's Speech calling for an end to public sector pay restraint, which has significantly reduced the value of wage packets since 2010 due to a two-year freeze, followed by years of 1% caps on annual rises.

Shadow chancellor John McDonnell said that the confusion surrounding the Government's intentions reflected a "war" between 10 Downing Street and the Treasury over the issue.

"This war between Number 10 and the Treasury isn't sustainable. Shambles," said Mr McDonnell.

And Liberal Democrat Leader Tim Farron said: "The Tories are in utter chaos. They have U-turned on their own U-turn within the space of a few hours.

"The Treasury can find £1 billion for the DUP so Theresa May can cling on to power, but can't find the cash to properly pay our teachers, nurses and police. Public sector workers deserve a pay rise now, not for this decision to be kicked into the long grass."

Answering questions following a speech in London on Wednesday morning, Sir Michael was asked whether service personnel could expect above-inflation pay rises.

He replied: "That is a huge question. It is partly a matter for the pay review bodies but it also involves a forecast of where you expect inflation to be.

"I think we expect inflation to start falling back again from the autumn onwards. This is something we have to consider, not just for the Army but right across the public sector as a whole."

His comment came after Health Secretary Jeremy Hunt said he would pass on nurses' unhappiness over the cap to the Chancellor. Mr Hunt said he had "a great deal of sympathy for the case that nurses amongst others have made on the issue of pay".

And Transport Secretary Chris Grayling told the BBC's Daily Politics: "We have had to take some tough decisions and in the wake of the General Election we are going to have to think through what we do come the next Budget."

The Downing Street source said: "Ministers, including the Prime Minister and the Chancellor, have been clear that we are going to listen to the messages that were sent at the election.

"We understand that people are weary after years of hard work to rebuild the economy."

Asked whether the cap would be reviewed for future years, he added: "Public sector pay restraint is one of the tough choices we've had to make to balance the books after Labour's crash and what was left behind. We are working through and looking at recommendations from pay review bodies that are coming."

Labour's shadow communities secretary Andrew Gwynne said it appeared that the increase in Labour's vote in this month's General Election may be enough to force the Government into a U-turn on public sector pay, following their climbdowns on winter fuel payments and the pensions triple lock.

"The British people denied Theresa May a majority in the General Election. The Conservatives have no mandate to carry out their damaging cuts to vital public services and attacks on the British people," said Mr Gwynne.

TUC general secretary Frances O'Grady said: "It's about time that hard-working public sector workers got the pay rise they've earned. If the cap is lifted, it will be a massive victory for trade union campaigning.

"But this can't be kicked into the long grass, it needs to happen now. Public sector workers have waited long enough."

Tory former minister Sir Oliver Letwin acknowledged there was a case for "easing up" on austerity but warned that tax rises to pay for additional spending would have to stretch beyond the richest.

Sir Oliver told BBC Radio 4's Today programme: "It may well be that, in one way or another, a large number of people will have to pay a little more tax if we are going to maintain the trend towards reduced deficits and yet spend a bit more on the crucial public services that do need more spending."