UK weary of austerity, admits Hammond, but policy on public sector pay remains

The public are "weary" of austerity but the Government's approach to the public sector pay cap has not changed, Chancellor Philip Hammond said.

The Government would continue to assess the balance between being fair to public servants and the taxpayers who fund their wages, the Chancellor told business leaders.

He said there had to be a "grown-up" debate about how to meet demands for improved public services, arguing that increasing economic growth or broad-based tax increases were the only ways to fund them.

Mr Hammond has come under pressure from some of his ministerial colleagues to ease the pay restraint which has seen public sector workers subjected to a 1% cap on wage rises since 2012, following a two-year freeze.

Police minister Nick Hurd told the Commons there was an "active discussion" under way to ensure frontline workers are paid fairly, while Boris Johnson has also backed a wage boost for public sector staff.

Several Tory MPs have added to the pressure on Theresa May and Mr Hammond by calling for an end to the pay cap after the party lost its majority in the General Election to anti-austerity Labour, which has pledged to scrap the 1% ceiling.

But in a speech at a Confederation of British Industry dinner, Mr Hammond stressed the need to maintain discipline over the public finances.

He said: "Our policy on public sector pay has always been designed to strike the right balance between being fair to our public servants and fair to those who pay for them.

"That approach has not changed; and we continually assess that balance.

"But we do, of course, recognise that the British people are weary after seven years' hard slog repairing the damage of the Great Recession.

"They have travelled a long way but still the sunlit uplands seem stubbornly to remain one further ridge away."

Mr Hammond said that without strong economic growth, there is no way to support the improvements to public services that people want to see.

During Home Office questions in the Commons, Mr Hurd said: "We want to make sure that frontline public service workers, including the police, are paid fairly for their work, not least because of the contribution that they have made over the years to reducing the deficit that we inherited from the party opposite.

"And in that, the work they have done to safeguard hundreds of thousands of jobs. How we do that in a way that is sustainable and affordable is under active discussion."

Responding to Mr Hurd's comments, the Prime Minister's official spokesman said: "There are public sector pay review bodies carrying out their work. We are in the process of working through recommendations. That is what the minister was referring to."

Increasing public sector pay would boost the earnings of 5.1 million workers, including 1.6 million in the NHS and 1.5 million in public education, according to the Institute for Fiscal Studies. It is likely to cost billions of pounds.

Labour seized on an academic study which showed school teachers saw a drop in average earnings in real terms from £25 an hour in 2005 to £22 an hour in 2015, while police officers saw hourly earnings fall from £20 to £18 and doctors from £38 to £30.

The report to the Office of Manpower Economics found nurses' median hourly earnings were effectively stagnant over the course of the decade from 2005-15, starting off at £16, rising to £17 by 2010 before falling back to £16.

Shadow chancellor John McDonnell said: "This a damning report that reveals the harsh and unfair reality of the Tories' pay freeze on hard working public sector workers.

"The fact that some of the pillars of our community and the public sector such as teachers, doctors and police officers are seeing their pay cut exposes the double standards of a government that likes to praise their work but will not actually truly reward it."