Treasury minister dismisses ‘wildly excessive’ public sector pay claims stressing 3% limit – as he hints corporation tax rise might be scrapped to help struggling economy
A Treasury minister has dismissed ‘wildly excessive’ public sector pay claims stressing that hikes should be limited to 3 per cent.
Simon Clarke pointed to the ‘stretched’ public finances and huge debt interest bill as he signalled a tough line against double-digit union demands.
Departments are being warned that they will have to fund money from within existing budgets if they want to go beyond what was allowed for at the spending review last Autumn.
But the Chief Secretary also hinted at a rethink on the planned corporation tax increase, suggesting it would help businesses as the economy threatens to stall.
The intervention, in an interview with The Times, came as a report warned the UK is at ‘significant risk’ of heading into a recession due to the mounting cost-of-living crisis and the Ukraine conflict.
The latest economic outlook from KPMG predicts that growth will more than halve to 3.2 per cent this year, before tumbling to 0.7 per cent in 2023. However, it predicted that any recession should be ‘mild’.
Simon Clarke pointed to the ‘stretched’ public finances and huge debt interest bill as he signalled a tough line against double-digit union demands
Mr Clarke said he would ‘love to see tax cuts as soon as possible’, but stressed Rishi Sunak (pictured) was ‘dead right when he says that you only get tax cuts when you earn them’
Figures last week showed that the government’s debt interest costs are soaring
Asked about the prospect of big pay rises, Mr Clarke said: ‘The public finances are very stretched. We’re carrying an £83 billion debt interest payment this year and if we want to come through this as quickly as we can that just means we can’t tolerate wildly excessive public sector pay claims.’
‘History would suggest the inflation in Britain tends to be stickier than we all normally hope it to be. And so that discipline is really, really important.’
Mr Clarke said he would ‘love to see tax cuts as soon as possible’, but stressed Rishi Sunak was ‘dead right when he says that you only get tax cuts when you earn them’.
However, he hinted action is more likely on corporation tax – due to soar from 19 per cent to 25 per cent next year.
‘It is obviously the case that we want to see British business equipped to compete. And in general terms, obviously, the lower the burdens we can place on them, the better their chances will be,’ Mr Clarke said.
The comment came after Boris Johnson said there is ‘no point’ in giving workers bumper pay rises because it would push up prices even further.
Teachers, nurses and doctors have threatened to go on strike unless they are handed double-digit salary hikes.
But the Treasury has told public sector workers they should instead expect rises around the 3 per cent mark.
Speaking at a G7 summit in Bavaria yesterday, the Prime Minister insisted he had to ‘be realistic with people’ about how restraint on salary rises was needed to avoid fuelling inflation.
Asked if teachers, nurses and doctors should only get 3 per cent rises, he told ITV News: ‘At a time when you’ve got inflationary pressures in an economy, there’s no point in having pay rises that just cause further price rises because that just cancels out the benefit.
‘So I know that people will find that frustrating but I’ve got to be realistic with people about where we are.
‘I think – I’m pretty certain of this – that our inflationary pressures will abate over time and things will start to get better.’
The PM (pictured at the G7 summit in Bavaria today) insisted he had to ‘be realistic with people’ about how restraint on salary rises was needed to avoid fuelling inflation
Mr Johnson added: ‘We’ve got to make sure that we’re taking the sensible and responsible decisions to have the strongest possible economic recovery.’
The Bank of England has warned that inflation, which is already at a 40-year high, will exceed 11 per cent in October.
The public sector pay review bodies, which recommend salaries for about 5.7million workers including teachers, nurses, police and armed forces personnel, are due to report in the coming weeks. Unions representing teachers and nurses have demanded rises worth more than 12 per cent, while junior doctors are calling for 22 per cent.
They are threatening industrial action this summer arguing that their members face real-terms cuts in pay.