British Prime Minister Rishi Sunak attempted to resolve months of crippling public sector strikes by offering pay increases of 6% and above to teachers, doctors, and other workers. However, he cautioned that such raises would come at a substantial cost, potentially leading to cuts in other areas, Reuters reports.
Sunak faces an upcoming election against a backdrop of high inflation, a stagnant economy, and a legacy of scandals from his Conservative Party's 13 years in power. Opinion polls currently show the Conservatives trailing behind the opposition Labour Party. Sunak stressed that he had accepted the recommendations of independent pay review boards, emphasizing that this offer represented a final decision to end the industrial action.
While describing the pay award as significant, Sunak acknowledged that it would exceed the government's budget by billions of pounds, resulting in consequences. Implementing the package would require finding an additional £5bn ($6.5bn) from existing departmental budgets over the next two years.
Sunak stated that the offer was final and there would be no further negotiations for this year's settlements. Education unions immediately called off planned strikes and recommended accepting the deal, but doctors' unions expressed skepticism. Although the pay increases fall below the current inflation rate of 8.7%, they aim to address the country's worst industrial unrest in over three decades.
Junior doctors would receive a 6% pay uplift and a £1,250 lump-sum increase, while teachers would receive a 6.5% raise. Similar settlements would be provided to police and military personnel.
With elevated inflation and rising public debt levels, the government faces challenges in balancing the need to end strikes. Increased wage spending would require tax hikes, cuts in public services, or deviation from borrowing reduction targets.
Sunak argued that the pay rises would not contribute to inflation since there would be no new borrowing or spending. Funding for teachers' pay increases would come from reallocating the existing department budget. Other potential funding sources, such as increased fees for international workers accessing the health service, will be closely scrutinized by trade unions.
The government's position places departments in a difficult position, forcing them to choose between offering reasonable salaries and further cuts to underfunded public services, according to Unite Union General Secretary Sharon Graham. The British Medical Association argued that the offer still amounts to a pay cut for junior doctors.
Government ministers have expressed concerns that excessive wage increases could undermine inflation reduction goals. The Bank of England has focused on pay in the private sector, where wages have risen faster and have a more immediate impact on consumer price inflation.
Britain's total debt stands at just over 100% of GDP, slightly below the average for advanced economies.
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