Reeves signals she will give inflation-busting pay hikes for public sector workers

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Rachel Reeves suggested that public sector workers may receive pay increases higher than inflation, emphasizing that the cost of not reaching an agreement could lead to strikes.

The chancellor has assured that a decision will be made promptly following reports that independent pay review bodies have suggested a 5.5 percent increase for teachers and approximately 1.3 million NHS workers.

"There are consequences to not reaching a resolution, including the potential for more strikes and difficulties in finding new employees," she explained during an interview with Laura Kuenssberg on the BBC's Sunday show.

Ms Reeves stated, "We will handle the situation correctly and ensure that the numbers are accurate."

She mentioned that there will be an update by the end of July, along with the release of a Treasury report on the condition of the public finances. It's doubtful that schools and hospitals will be able to cover a 5.5 percent salary increase, which is more than double the current inflation rate, using their current budgets.

Paul Johnson, who heads the well-respected Institute for Fiscal Studies, proposed that the salary increases could result in an additional expenditure of at least £3 billion just for schools and the NHS.

He informed the BBC that there is no set amount budgeted for schools in terms of cost. It is likely around 1 or 2 percent, definitely not 5.5 percent. Therefore, an extra £1 billion would be needed for schools compared to what they are currently anticipating.

"And potentially twice as many people throughout the NHS if the plans for the NHS are comparable, as it seems they could be."

Ms Reeves criticized the Conservative government for avoiding difficult choices about pay. She claimed that the recommendations had been sitting on former education secretary Gillian Keegan's desk before the election was announced.

The chancellor said that she took no action. She did not go public with it or discuss how she planned to address the situation.

She said: "They decided to have an election instead of facing difficult choices. They avoided the challenges, and now it is our responsibility to solve the problems and repair the damage."

But shadow chancellor Jeremy Hunt insisted that he did not avoid tough decisions regarding public sector pay.

He said on the BBC's Sunday With Laura Kuenssberg show: "You have interviewed me many times before and you can point out many faults, but not making strong and challenging choices is not something I believe people would accuse me of."

An unexpected increase in pay may create a big problem for Rachel Reeves as she prepares for her first budget, which is expected to be released in the fall. During her election campaign, she made a commitment to manage borrowing and avoid implementing several tax hikes.

However, if the pay review bodies do not comply with the recommendations expected to be released this month, it could lead to a conflict with the trade unions that represent the six million employees in the public sector.

The general secretary of the National Education Union, Daniel Kebede, has expressed concern that not taking the advice of pay-review bodies seriously could lead to workers going on strike.

Highlighting the efforts made by the Education Secretary, Bridget Phillipson, to establish better relationships with teachers, he expressed concerns about the Treasury potentially stepping in and failing to follow through on a promised 5.5% pay increase.

We really don't want a strike to happen, but it might be harder to prevent if the Treasury decides to get involved.

Additionally, Ms. Reeves mentioned that the government plans to conduct a thorough assessment of pensions in order to boost growth by releasing funds from these schemes.

She stated that individuals who compromise and save each month to set aside money for their retirement deserve higher returns on their savings. She emphasized the need for the government to prioritize unlocking more investment opportunities.