Pay rises for teachers and some NHS staff could cost an extra £3bn, the Institute for Fiscal Studies (IFS) has warned, if independent review bodies recommend an above-inflation salary boost.
According to the Times, both pay bodies have recommended rises of 5.5% – significantly higher than the 3% the government has budgeted for.
IFS director Paul Johnson said the money would need to be found through borrowing, increased taxes or spending cuts, as there is “no fourth option”.
A teachers’ union said a 5.5% pay award would be a “step in the right direction”, but said strike action would “seem inevitable” if the recommendation was ignored.
The independent pay review bodies represent 514,000 teachers and 1.36 million NHS workers.
Speaking to BBC Radio 4’s Today programme, Mr Johnson said he was not “terribly surprised” by the figure reported by the Times, as it was “roughly what pay is rising by across the economy”.
If the 5.5% figure was replicated across the entire public sector, beyond the reported recommendations for teachers and the NHS, that would equate to £10bn of extra funding required, he added.
The decision on pay comes after last year’s strike action by teachers and a string of walkouts by junior doctors asking for a better pay deal.
Daniel Kebede, the general secretary of the National Education Union, said the recommended figure would be a “step in the right direction” for schools.
“We are in the midst of a deep recruitment and retention crisis at the moment, and we do need an inflation plus pay award this year to take steps to correct that crisis,” he told the Today programme.
It would be “highly problematic” for the government to not implement the 5.5% pay award if that is the figure they have been recommended, he added.
“We absolutely would want to avoid strike action, but that would almost seem inevitable if the Treasury were to make such an intervention”, he added.
The Association of School and College Leaders said it would need assurances that the government would fund the pay award “as school budgets are already under immense pressure and cannot bear this additional cost”.
The above-inflation recommendation would pose a significant challenge to Chancellor Rachel Reeves, who is due to deliver her first budget in the autumn.
Education Secretary Bridget Phillipson pledged to recruit 6,500 new teachers, and said the profession had been “talked down, sidelined and denigrated” for too long.
Health Secretary Wes Streeting has started face-to-face talks with junior doctors in the hope of ending long-running pay dispute.
Decisions on pay rises for NHS staff, teachers, police and prison guards in England have to be taken by the end of this month, when the official public sector pay review process for 2024-25 must be concluded.
A government spokesperson told the Times: “We value the vital contribution the almost six million public sector workers make to our country.
“The pay review process is ongoing, and no final decisions have been made. We will update in due course; however, we are under no illusions about the scale of the fiscal inheritance we face.”
The BBC has contacted Downing Street and the independent pay review bodies for comment.
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