The Tories’ seven-year public sector pay freeze could finally be over after Downing Street declared Theresa May had “heard the message” from voters on austerity.
As a string of Cabinet ministers hinted that the 1% wage cap would be lifted in the coming Budget this autumn, a No.10 spokesman suggested a review of the 1% wage cap policy was underway.
In what would be a huge victory for Jeremy Corbyn and trade unions, the Government appeared to pave the way for an end to the controversial real terms salary cuts for teachers, nurses, police and millions of others in the public sector.
Downing Street made clear that independent pay review bodies, which have for years had their recommendations curbed by the cap imposed by George Osborne, could now take priority.
Asked directly if the pay cap was now under review, the PM’s political spokesman 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 have heard the message of the election that people are weary after years of hard work to rebuild the economy. Public sector pay restraint is one of the tough choices we’ve had to make…We are working through and looking at recommendations from pay bodies that are coming.”
The PM’s official spokesman also added that the Budget would be the next point at which decisions on pay would be confirmed. Treasury sources said that it was “open to discussion” on the issue.
Although No.10 later said “the policy hasn’t changed” on the 1% cap, the spokesman stressed he was “commenting on the here and now” and would not speculate about the future.
An intense battle is now set to take place behind closed doors in Whitehall as ministers work out if and how they amend the cap.
This year’s independent NHS pay review warned it was “not sustainable” to expect staff to suffer real terms pay cuts. In 2014, it said the pay cap “cannot continue to be the main mechanism” for austerity.
Last year’s teachers’ pay review said it expected a pay rise “significantly higher than 1%”.
Labour set aside £4bn in its 2017 election manifesto to fund an end to the pay cap, but it is unclear how the Government would fund a similar pledge.
Nurses marched on Whitehall on Wednesday to protest at the pay freeze, while Corbyn and Labour MPs wore “scrap the cap” lapel badges.
Earlier, Defence Secretary Sir Michael Fallon said that the idea of a wage rise was “something we have to consider not just for the army, but right across the public sector as a whole”.
His words, to a think tank on Wednesday morning, followed a similar hint from Health Secretary Jeremy Hunt that he would lobby the Treasury to end the 1% pay cap on nurses.
Transport Secretary Chris Grayling was another minister who refused to rule out a pay rise.
“Philip Hammond has said we obviously have to learn lessons from the general election. We will have a budget later this year. He will set out our ongoing plans in that budget,” he told the BBC.
HuffPost UK revealed this week that a new TUC-commissioned poll found that even Tory voters wanted a pay rise for the public sector. Some 68% of Tory voters and 80% of potential Tory switchers to Labour back an end to the 1% cap.
Theresa May is under huge pressure to abandon the pay freeze which has left millions of workers – from hospital cleaners to job centre staff - out of pocket as inflation has outstripped their salaries.
Labour has tabled an amendment to the Queen’s Speech urging an end to the wage freeze, which has existed for all but the lowest paid since 2010. The 1% cap has been in place since 2012.
Labour’s Jonathan Ashworth urged ministers to confirm to the Commons that the pay cap was now under review.
A senior Labour source said: “They’ve retreated on the winter fuel allowance, they’ve abandoned their attempt to scrap triple lock on pensions and now they’ve appeared to indicate that they are going to review the public sector pay cap which we called for in the election campaign.
“It’s very encouraging that they’ve conceded to the public view and the hugely increased vote for the Labour party in the election. It’s quite clear they no longer have a mandate for many of the policies that they stood by in the election campaign, in particular the policies around austerity.”
TUC general secretary Frances O’Grady told HuffPost UK: “The government now need to commit to this in Parliament, not just leak tell the press lobby.
“If these artificial pay restrictions are lifted, it will be a massive victory for trade union campaigning and hard-pressed public servants. But this can’t be kicked in to the long grass, it needs to happen now. Public sector workers have waited long enough.
“And any increase has to be backed by new money, not by loading extra costs on councils, hospitals and schools.”
After a speech at an event organised by the Royal United Services Institute in central London, Fallon was asked in a question and answer session whether defence budget increases would include a rise in wages to cope with inflation.
“That is obviously a huge question,” he replied.
“It’s 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.”
Crucially, he then added: “But it is obviously something we have to consider not just for the army but right across the public sector as a whole.”
Rehana Azam, national officer of the GMB union, said: “Public sector pay cuts were always a political choice.
“The devil will be in the detail – all public sector workers must now receive an above inflation pay rise, including those not covered by a Pay Review Body such as council workers, school support staff and police staff.
“This is one Theresa May U-turn we welcome, but our members won’t take the Government’s word for it.”
Public and Commercial Services union general secretary Mark Serwotka said: “If this is a sign of the Government beginning to see sense we welcome it, but any review must include all public sector workers and lead to the cap being lifted for all of them. Nothing else will be acceptable.”