No return to austerity, Rishi Sunak says, but unions threaten strikes over public sector pay freeze

Rishi Sunak has promised the country will not see a return to austerity with large tax hikes in Wednesday’s spending review, but suggested he could impose a pay freeze on public sector workers.

The Chancellor said any punitive tax rises during the pandemic would risk hitting workers "in the fog of enormous economic uncertainty".

"You will not see austerity next week,” he told Sky’s Sophy Ridge on Sunday.

“What you will see is an increase in Government spending, on day-to-day public services, quite a significant one coming on the increase we had last year."

But Mr Sunak would not rule out a freeze on the pay of public sector workers, suggesting the Treasury could seek to make savings on its large annual deficit from wages.

He said: "When we launched the spending review I did say to departments that when we think about public pay settlements I think it would be entirely reasonable to think of those in the context of the wider economic climate.

"I think it would be fair to also think about what is happening with wages, with jobs, with hours, across the economy, when we think about what the right thing to do in the public sector is."

Mr Sunak and the Prime Minister, Boris Johnson, are under pressure from their own party to control the level of public borrowing, after the Government borrowed a record £22.3bn in October.

Mr Sunak said the deficit could not go on indefinitely.

He told the BBC: "It is not just numbers on a chart, it is people's lives and livelihoods, it's their security being impacted. And it is something that we are going to grapple with for a while to come, sadly."

Unions have reacted angrily to the prospect and industrial action is possible if the freeze is confirmed this week.

Frances O'Grady, the head of the TUC confederation of trade unions, appealed to a "sense of fairness" in urging ministers not to impose a freeze, which is expected to exempt frontline NHS workers.

"We saw ministers join millions of us clapping firefighters, refuse collectors, social care workers - I don't think this would be the time to reward them with a real pay cut," she told Ridge.

"If you want to motivate a workforce when we are still facing a second wave of a pandemic, and we're going to have a tough winter - we all know that - the last thing you do is threaten to cut their pay."

The Chancellor’s spending review will unveil a £3 billion package to support the NHS in recovering from the pandemic.

The Treasury has said the NHS will get £1 billion to address backlogs by catching up on checks, scans and operations that were delayed by Covid-19.

About £1.5 billion will be used to ease existing pressures in the health service and £500 million will help support mental health services.

Mr Sunak will also detail the much-delayed National Infrastructure Strategy for £100 billion of long-term spending to help tackle the climate crisis and invest in transport.

He will also alter the Treasury's "green book", a set of rules to determine the value of Government schemes which is thought to favour London and the south east of England as he seeks to deliver on the Government's "levelling up" agenda.