Chancellor expected to approve 5.5% pay rise for teachers and some NHS staff

Rachel Reeves is expected to approve above-inflation pay rises for millions of public sector workers next week.

It would mean teachers and around 1.3 million NHS staff could be in line for a 5.5% pay increase.

The Chancellor is set to respond to the recommendations of independent pay review bodies on Monday.

The pay rise would cost an extra £3.5 billion, but the government could face further industrial action if the increase is refused.

Ms Reeves will also argue in Parliament that the Tories left Labour with a dire spending inheritance, including a £20 billion black hole.

She could reportedly also announce delays to a string of major capital projects to plug the shortfall.

Sir Keir Starmer has previously acknowledged there would be a cost if failing to follow the recommendations of the pay review bodies led to a fresh wave of industrial disputes in the public services.

Labour did not deny reports that Ms Reeves could on Monday make the same argument as she signs off on the pay increases despite the shortfall in government funding plans.

The findings of a Treasury spending audit she will detail will reveal “the true scale of the damage the Conservatives have done to the public finances”, a Labour source said.

An early assessment has reportedly found a nearly £20 billion annual gap between revenues and funding commitments.

Public sector pay rises well above the 3% expected by the Treasury will put extra pressure on spending under Ms Reeves’ self-imposed fiscal rules, which include having debt falling as a share of gross domestic product in five years’ time.

Extending the 5.5% pay boost – which is above inflation at 2% – to the entire public sector could cost some £10 billion a year, according to the influential Institute for Fiscal Studies (IFS).

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