Government hints at a possible end to the cap on pay rises for public sector workers have descended into utter confusion after Downing Street rapidly changed tack, insisting that the policy of limiting annual rises to 1% would remain in place.
Hours after a senior Conservative source indicated that ministers would review the cap at the next budget, saying people were “weary” after years of belt-tightening, Theresa May’s spokesman said this was not the case. “The government policy has not changed,” he told a No 10 briefing, repeating the phrase or variants of it 16 times as he was pressed on how this could tally with the earlier comments.
The reversal came before a vote on Labour’s amendment to the Queen’s speech on Wednesday evening calling for an end to cuts to emergency services and an end to the cap was rejected by MPs by 323 votes to 309, a government majority of 14.
The statement followed hints that the cap could be eased amid wider moves to loosen austerity in the wake of May losing her majority at the election.
Both the transport secretary, Chris Grayling, and the defence secretary, Michael Fallon, had talked earlier on Wednesday about a possible re-examination of the public sector pay cap. Answering questions following a speech in London, Fallon was asked about possible above-inflation pay rises for service personnel. He said: “This is something we have to consider, not just for the army, but right across the public sector as a whole.”
The Conservative source then indicated that the the policy would be reviewed at the next budget. “We understand that people are weary after years of hard work to rebuild the economy,” they said. “We’ve heard the message at the election. There are recommendations from independent public sector pay review bodies and decisions will be taken [at the budget].”
But in a rapid reversal, the prime minister’s spokesman repeatedly insisted that the policy had not changed, prompting speculation that the chancellor, Philip Hammond, had resisted the change so as not to restrict his options ahead of the budget.
The shadow chancellor, John McDonnell, tweeted that the change of plan was down to a “war between No 10 and the Treasury”, calling the situation a “shambles”.
Tim Farron, the Liberal Democrat leader, said: “The Tories are in utter chaos. They have U-turned on their own U-turn within the space of a few hours. This is not strong and stable – it is a government that is spinning out of control.”
The cap on public-sector pay increases was imposed by George Osborne in 2012 and rolled over for another four years in the chancellor’s 2015 budget, meaning that the ceiling is fixed until 2019.
May’s spokesman indicated that it was still possible that some public sector workers would receive a rise of more than 1%, saying that when the various independent public sector pay review bodies report to ministers, they have some scope to not accept their findings. He said: “In the past the government has accepted recommendations, and on other occasions it has not accepted recommendations. The government always sets out the reasons for doing so.”
But asked whether people were “weary” after years of pay restraint, May’s spokesman stressed the need for continued fiscal discipline. He said: “There is a recognition that it has required hard work and sacrifice, including from public sector workers, but we also have to ensure that, that sacrifice having been made, we continue to protect jobs and deal with our debts.”
Labour had tabled amendments to the Queen’s speech calling for the cap to be dropped. The party made the cap, which affects the pay of teachers, nurses and other public sector employees, a key argument in the election, and Labour MPs at prime minister’s questions on Wednesday wore badges from the Royal College of Nursing with the slogan: “Scrap the cap!”
The living standards of many public sector workers have suffered because of years with low or no pay rises. During the election, a nurse confronted May about the issue during the BBC’s election debate about the years of continued pay squeezes.
The Liberal Democrat chief whip, Alistair Carmichael, said on Wednesday morning his party would back Labour’s amendment. “The government must listen to the overwhelming tide of public opinion and give our police, firefighters and nurses a pay rise,” he said. The Scottish National party said its 35 MPs would also support the amendment.
Frances O’Grady, the general secretary of the TUC, which has made the demand to “scrap the cap” a centrepiece of recent campaigning, welcomed the heavy initial hint from Downing Street. “Our polling shows there’s huge support to scrap the cap right across the political spectrum, including from Tory voters,” she said. “There is no doubt that the world has shifted.”
She said the TUC would maintain the pressure on the government in the run-up to the autumn budget, seeking to ensure that the 1% limit is lifted for all sectors, not just for emergency workers and the NHS. “Healthcare workers, firefighters, ambulance drivers will be the first to say to you that public services are a team.
“What politicians sometimes forget is that in many, many cases, public servants are the service: it’s the human beings who are the service, and we need to invest in them,” she said.
The government is coming under increasing pressure to change course on austerity, including from some of its own backbenchers, after the general election result wiped out Theresa May’s majority. The Conservative MP Sarah Wollaston said the hung parliament meant a new approach would be required, and said part of this would be to ease the public sector pay cap.
“I’d agree with the points that have been made that it’s time for us to think again about the impact of the public sector pay cap,” she said. “Because there’s no doubt in my mind that seven years of this cap is now having a significant impact on morale within the health service, and across our wider public sector.”
