Britain's Chancellor of the Exchequer Rachel Reeves has expressed her willingness to give nearly 2 million public sector workers pay rises above the current rate of inflation in a bid to avoid widespread public sector strikes. The move comes as two pay review advisory bodies recommended a 5.5% pay rise for 460,000 teachers and 1.4 million National Health Service workers.
Reeves, recognizing the value of public service workers, expressed concern about the costs associated with long-term conflicts with unions and challenges in recruiting new employees. Labour, which won a substantial majority in the general election earlier this month, has promised a decade of “national renewal” without raising income tax, corporation tax or value-added tax rates.
The Institute for Financial Studies estimates that implementing the proposed pay rise would cost around £3 billion ($3.88 billion), given Britain's current inflation rate of 2%. Reeves, the nation's first female finance minister, promised the government would ensure fiscal obligations were met if the pay rises were approved.
To finance the proposed increase, the government should consider raising taxes, increasing borrowing or cutting spending, according to the IFS. Reeves plans to announce the next budget date by the end of this month, outlining his strategy for public sector pay deals.
Reuters contributed to this article.
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