Reeves toughens stance on UK public pay rises to show restraint

Alex Wickham, Bloomberg News on Nov 2, 2024

By clicking submit, I authorize Arcamax and its affiliates to: (1) use, sell, and share my information for marketing purposes, including cross-context behavioral advertising, as described in our Privacy Policy , (2) add to information that I provide with other information like interests inferred from web page views, or data lawfully obtained from data brokers, such as past purchase or location data, or publicly available data, (3) contact me or enable others to contact me by email or other means with offers for different types of goods and services, and (4) retain my information while I am engaging with marketing messages that I receive and for a reasonable amount of time thereafter. I understand I can opt out at any time through an email that I receive, or by clicking here

The U.K. will take a tougher approach to future public sector pay awards, part of a renewed effort by Chancellor of the Exchequer Rachel Reeves to reassure financial markets she will carefully manage the nation’s finances.

Above-inflation pay rises will only be offered to public sector workers if they can be funded by improvements to productivity, in what government officials said was a hardening of the Treasury’s position. That was the right approach for the public sector and the taxpayer, a Treasury official said.

The change in policy was included in a document published alongside the chancellor’s budget statement on Wednesday. It comes after Prime Minister Keir Starmer settled a number of pay disputes with striking public sector workers in the weeks after he took office at Labour’s general election win in July, including giving England’s junior doctors a pay rise of 22.3% on average.

“The government remains committed to delivering fair and timely pay awards for public sector work forces in 2025-26. However, it will need to carefully consider the trade-offs required to afford pay awards. Over the medium-term, above inflation pay awards are only affordable if they can be funded from improved productivity,” it said in the budget document.

The move will be seen as an attempt by Reeves to demonstrate she intends to exercise restraint on public spending, although it will likely face criticism from trade unions, who are traditionally the Labour’s financial and political backers.

The chancellor has sought to reassure markets after a sharp selloff in U.K. bonds this week that was seen as a sharp rebuke to her plans for more borrowing. The “No. 1 commitment” of the Labour government is “economic and fiscal stability,” Reeves told Bloomberg Television in an interview on Thursday.