Public sector workers including teachers, soldiers and police officers will reportedly be given pay rises above inflation as part of new government plans.
Theresa May is expected to make the announcement next week as one of her final acts as prime minister, according to The Times.
The proposed pay rise, which will come at a cost of £2bn, is the public sector’s biggest pay rise in six years.
Two million workers will receive the raise, with police officers set to get a 2.5% pay rise, soldiers a 2.9% increase and teachers and other school staff 2.75%.
Dentists and consultants will get 2.5% and senior civil servants 2%.
The rises will not apply to other public sector staff, including nurses and more junior civil servants, as their pay is dealt with separately.
It is expected the money will come from existing budgets, with the exception of some extra funding for schools.
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Although the pay increases are being welcomed, there is still some concern that the rises do not match the private sector’s push ahead on salaries.
Jonathan Cribb, a senior research economist at the Institute for Fiscal Studies, told The Times: “These public sector pay rises are higher than last year’s and considerably higher than the 1% for many years before that.
Prime Minister Theresa May is expected to announce the plans next week
“It is the highest nominal pay increase since the coalition. But these increases are still slower than pay rises that are happening on average in the private sector.”
Mr Cribb also warned that without any new money to fund the rises “savings will have to be made elsewhere”.
The move signals a change in direction on public sector pay by the Conservative Party and Mrs May.
Public sector pay rises were capped at 1% by the Conservative-led coalition after it came to power in 2010, but the cap has since been scrapped.
Last year, Mrs May refused to agree to the recommendations of independent public sector pay review bodies, prompting a backlash from home secretary Sajid Javid and then-defence secretary Gavin Williamson.
Speaking at the last Conservative Party conference, the prime minister said the era of austerity had come to an end.
But with the Tory leadership election drawing to a close, front runner Boris Johnson refused to commit to a pay rise for public sector workers – despite an apparent policy pledge by one of his backers.
Boris Johnson refused to commit to a pay rise for public sector workers
Health secretary Matt Hancock said the public sector would be “shown some love” if Mr Johnson won, although the leadership contender specifically commit himself.
“Of course he’s right, we are going to make sure that we properly fund our public services,” Mr Johnson said.
“It’s very important when you’re in charge of a great public service, whether it’s the police or transport, you’ve got to make sure – or local government – you’ve got to make sure that you understand their cares and their needs.”
Labour’s shadow chancellor John McDonnell called for any pay rise for public sector workers to match overall wage growth, and be funded by new money and not from existing Whitehall departmental budgets.
He said: “With overall wage growth at 3.4%, it looks like Philip Hammond’s final act as chancellor will be this insulting pay offer set to push public sector workers further behind.
“After years of holding back the pay of our dedicated public sector workers, it is shameful for the government to pay for ending the public sector pay cap with more cuts.
“Labour will invest in our public services across the board, ending years of austerity and eliminating in-work poverty.”