British Prime Minister Rishi Sunak made a bid to resolve the protracted public sector strikes on Thursday by offering teachers, doctors, and other workers pay increases of 6% and higher. However, Sunak cautioned that such generous raises would come at a considerable cost, potentially necessitating cuts in other areas, as it would require billions of pounds in additional spending.
Sunak, who faces an election within the next 18 months, finds himself grappling with a range of challenges. These include the highest inflation rate among major economies, a sluggish economy, and a legacy of scandals and missteps that have plagued his Conservative Party’s 13-year tenure in power. Recent opinion polls indicate that the Conservatives are trailing far behind the opposition Labour Party.
The prime minister emphasized that the proposed pay increases were based on recommendations from independent pay review boards and represented a final offer aimed at ending the prolonged industrial action. Sunak acknowledged the significance of the pay award, stating that it was one of the most substantial increases in decades. However, he also highlighted the financial implications, as the government had not budgeted for such significant expenditures.
Implementing this package would require finding an additional £5 billion ($6.55 billion) from existing departmental budgets, with £2 billion allocated for the current year and £3 billion for the following year. Sunak stressed that the offer presented on Thursday was non-negotiable, firmly stating that the government would not engage in further discussions regarding this year’s settlements, regardless of any strikes that might occur.
Education unions swiftly responded to the proposal, announcing the cancellation of planned strikes and recommending acceptance of the deal. However, two doctors’ unions expressed skepticism that the offer would be sufficient to resolve strikes within their profession.
Although the proposed pay increases fall below Britain’s current inflation rate of 8.7%, they aim to bridge the gap after the country experienced its most severe period of industrial unrest in over three decades. Junior doctors are set to receive a 6% pay uplift along with a lump-sum increase of £1,250, while teachers would see a 6.5% raise. Similar settlements will be offered to police and military personnel.
Amid over a year of persistent inflation, peaking at over 11%, the government faces the challenge of striking a delicate balance between resolving strikes and managing escalating levels of public debt. There is limited room for increased wage expenditure without resorting to tax hikes, cuts in other public services, or failing to meet self-imposed targets for reducing borrowing.
Sunak emphasized that the proposed pay rises would not contribute to inflation since they would not be financed through new borrowing or additional spending. Instead, funding for teachers’ salary increases would be obtained by reallocating the existing department budget. The prime minister outlined various measures to support the higher salaries, including raising fees for international workers accessing the country’s health service and increasing the cost of securing a visa to enter Britain.
Trade unions are likely to scrutinize other potential sources of new funding, arguing that budgets for public sector services, such as hospitals, are already stretched thin. Sharon Graham, General Secretary of the Unite union, expressed concerns that the government was placing departments in a difficult position, forcing them to choose between providing workers with reasonable salaries or further reducing services in already underfunded public sectors.
The British Medical Association, representing approximately 45,000 junior doctors in England, criticized the government’s offer, asserting that it still amounted to a pay cut in real terms. Phil Banfield, Chair of Council at the BMA, stated that junior doctors, who are currently engaged in a five-day strike, were likely to continue taking further industrial action.
While government ministers have consistently warned about the risks of excessive wage increases, citing potential threats to inflation reduction goals and the exacerbation of rising prices, the Bank of England has shown a greater focus on pay in the private sector. Private sector wages have outpaced public sector increases and have a more immediate impact on the calculation of consumer price inflation.
Britain’s total debt currently stands at just over 100% of GDP, slightly below the average among advanced economies.