Public sector workers look set for below-inflation pay rises after Boris Johnson warned a meeting of cabinet that generous settlements could trigger an inflationary spiral.
“Limited” pay restraint was likely to be less damaging to the real value of take-home pay and less likely to drive up household costs such as mortgages, ministers told the meeting.
Recommendations on rises for groups like police, teachers, NHS workers and the armed forces are expected from independent pay bodies before the summer.
But they can be overruled by ministers in relevant departments, who are facing the prospect of hikes of 9 per cent or more if pay is to keep pace with inflation and ease the pressure of the cost-of-living crisis.
Addressing the regular weekly meeting of cabinet 10 Downing Street, Mr Johnson backed a warning from Treasury minister Simon Clarke that awards of this size would risk fuelling inflation further.
The warning came as the head of energy regulator Ofgem said that the cap on combined gas and electricity prices is expected to jump by £800 in October to an annual total of around £2,800 for the average household – up from around £1,300 12 months earlier.
The PM’s official spokesperson refused to say whether ministers will act to rein in recommended rises which are perceived to be too large.
But he said: “The government has already pledged to increase public sector spending and is awaiting decisions by public sector review bodies.
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“However ministers made clear the risk of triggering higher inflation must be part of considerations when deciding pay awards this year.”
The spokesperson did not rule out ministers overriding the decisions of the review bodies.
“That wasn’t the suggestion the prime minister said and I don’t want to jump ahead of the independent process,” said the spokesperson. “You’ll know the government has the capability to do that in the purely hypothetical sense.
“The point that ministers were emphasising is that a spiralling inflation will do more to damage people’s take-home pay than limited pay restraint.”
Mr Johnson’s spokesperson denied that the PM was trying to send a signal to the pay review bodies, who arrive at their recommendations independently of government.
