Chancellor Rishi Sunak will use today’s Budget announcement to lift the pay freeze on the public sector.
The move will see millions of public sector workers enjoy wage hikes next year, with teachers, nurses, doctors, and members of the armed forces in line to benefit.
In a statement on Monday, the Treasury said that “the solid economic recovery and encouraging signs in the labour market” were justifying factors in axing the pay freeze in today’s Budget.
Meanwhile, fuel duty is expected to be frozen for a twelfth successive year and VAT on household energy will not be reduced.
The temporary public sector pay freeze was brought in during last November’s spending review as the government battled to keep on top of public finances during the Covid-19 pandemic. Only the lowest-paid were excluded from the measure as the chancellor argued that he could not justify a wage increase across the public sector when private sector workers were seeing their salaries and hours reduced through lockdown.
Indeed, public sector average weekly earnings rose by 4.5 per cent over 2020/21, while wage increases in the private sector were at 1.8 per cent - a third lower than before the pandemic.
Sunak said at the time that the government was “targeting resources at those who need it most.”
The Treasury has said that once the public sector pay freeze is axed, the exact pay rise workers can expect will be dependent on recommendations from independent pay review bodies.
The chancellor said: “The economic impact and uncertainty of the virus meant we had to take the difficult decision to pause public sector pay last year.
“Along with our plan for jobs, this action helped us protect livelihoods at the height of the pandemic. Now, with the economy firmly back on track, it's right that nurses, teachers and all the other public sector workers who played their part during the pandemic see their wages rise.”
Business minister Paul Scully praised the decision, saying that it was important that public sector workers were recognised for their work and “rewarded fairly”.
The axing of the pay freeze comes as part of several measures to help those on low incomes in the wake of the National Insurance hike and higher energy and goods prices, with an increase in the National Living Wage also announced ahead of the Budget.
Scully told the BBC: “We know there are pressures. We know this is a difficult time for the economy, for people in the country in terms of the cost of living.”
The public sector pay rise and increase to the National Living Wage come after Labour MPs hit out at the Conservatives for overseeing a “cost of living” crisis, amid the National Insurance rise, cuts in Universal Credit and soaring energy and goods prices.
Some Conservative backbenchers had also pressed government to do more to help those on low incomes.
The Unison union has warned that the government must also increase departmental budgets to avoid the pay freeze continuing “in all but name”.
Clive Watson, executive chair of the City Pub Group, has spoken out about the impact of rising wages on businesses, warning that it will cost his company a further £1 million per year on top of energy price hikes, inflation, and higher employers’ National Insurance Contributions.
Watson said: “We cannot absorb all these increased costs… the only way forward for us is to put the price of food and beer up in our pubs.”
Image sourced from Wikimedia Commons
