Downing Street has described as “speculation” reports that Theresa May might be preparing to end the long-standing 1% cap on pay rises in the public sector.
The Sun reported an announcement of an end to the seven-year cap was expected to form the centrepiece of Chancellor Philip Hammond’s autumn Budget.
With the Treasury due to send out letters within weeks setting out the remit for public sector pay review bodies for next year’s pay round, pressure is mounting on Mr Hammond to allow them greater flexibility to recommend more generous rises.
According to The Sun, one plan under consideration could see the lowest-paid public sector workers, along with groups with the biggest retention problems such as nurses and senior civil servants, granted a pay rise at least in line with inflation next April, with restraint for others lifted in 2019.
Asked whether the Prime Minister was planning to end the cap, a Downing Street spokeswoman said: “The process is that the Treasury writes to the independent public sector pay bodies in the autumn to set out their remit, the departments submit evidence and those bodies make their recommendations and we confirm settlements for workforces.
“That process is ongoing and I’m not going to comment on speculation on what might or might not happen at the end of that.”
The spokeswoman added: “She has said on a number of occasions that we know that a number of people in the public and private sector feel that they are just about managing.
“We recognise the sacrifice that they are making, but there is a process in place and I can’t pre-empt that process.”
Responding to reports of the possible lifting of the cap, the national secretary of the GMB union, Rehana Azam, said: “The artificial cap on pay was always a political choice by the Conservative Government.
“This damaging policy has seen thousands pinched from public sector workers over seven years.
“If real pay rises are now on the cards it will be a huge victory for the GMB’s campaign and for public pressure on the Government, but the devil will be in the detail.”
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Liberal Democrat leader Sir Vince Cable said an end to the cap would be “long overdue”.
“The situation has changed since the public sector pay cap was first introduced, at a time when there was a real budget emergency and fear of large scale unemployment,” he said.
“The issue we face now is very different.
“We are struggling to recruit and retain public sector staff and the effects of this recruitment crisis are being felt across the board, from our schools to our hospitals.
“We must end the pay cap now and give our public sector workers the pay rise they deserve, after years of seeing their pay packets cut in real terms.”