Public sector pay policy has not changed, says Hammond
The Government's policy on the public sector pay cap has not changed, 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.
But without strong economic growth or increasing taxes, there is no way to support the improvements to public services that people want to see, he said.
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."
In comments aimed at Jeremy Corbyn's Labour, he said: "That does not mean we can't have a debate in Britain about the level of funding of public services.
"But it does mean that it has to be a grown-up debate where we acknowledge that borrowing to fund consumption is merely passing the bill to the next generation and reject the fallacy that the burden of additional taxation will always fall on someone else.
"Then, hopefully, we can build a consensus that the only sustainable solution is to increase the trend rate of growth.
"So the serious question to the electorate cannot be, 'would you like us to tax someone who isn't you to pay for you to consume more?', but, 'would you be willing to pay more tax to consume more public services?'."
It comes after public sector workers saw their total earnings rise by an estimated 0.9% in 2016 - the lowest year-on-year increase this century.
Salaries were frozen for all but the lowest paid workers in 2011-12 and 2012-13.
A pay cap based on an average annual increase of 1% was then introduced in 2013-14.
This is currently intended to remain in place each year up to and including 2019-20.