British Prime Minister Rishi Sunak on Thursday sought to end months of crippling public sector strikes by offering teachers, doctors and other workers pay increases of 6% and above, but warned it would cost billions that could mean cuts elsewhere.
The Conservative leader said he had accepted the recommendations of independent pay review boards on wage rises for public sector workers, stressing that it was a final offer intended to end months of industrial action.
"This is a significant pay award, it's one of the most significant we've had in decades, and it is costing billions of pounds more than the government had budgeted for and that has consequences," Sunak said.
"Today's offer is final. We will not negotiate again on this year's settlements and no amount of strikes will change our decision."
Education unions immediately said they would call off planned strikes and recommend accepting the deal.
Junior doctors will now get a 6% pay uplift and a lump-sum pay increase of 1,250 pounds ($1,635), while teachers would get 6.5%. Police and the military will get similar settlements.
After more than a year of elevated inflation - which at its peak hit more than 11% - the government is struggling to balance the need to end strikes with rising public debt levels.
It has little room for more spending on wages without either hiking taxes, cutting other public services or missing its self-imposed targets to reduce borrowing.
NO NEW BORROWING
Sunak said the pay rises would not push up inflation because there would be no new borrowing or spending to fund the increases. Teachers' pay rises would be funded by a reallocation of the existing department budget.
Explaining how he would fund the higher salaries, Sunak said a fee paid by international workers to access the country's centrally-funded health service would rise and the cost of securing a visa to enter Britain would also increase.
Other sources of new funding are likely to be closely scrutinised by trade unions, who have said budgets for public sector services such as hospitals are already close to the bone.
"The government is putting its departments between a rock and hard place," said Unite union General Secretary Sharon Graham. "They now have to choose between paying workers a half-decent salary or cutting services in already underfunded public services."
The Hospital Consultants and Specialists Association - a smaller union representing doctors - called Sunak's announcement a public relations stunt and said it was "highly doubtful we'll see an end to strikes".
Sunak, facing an election next year and trailing badly in opinion polls, has promised to halve inflation and ministers have stressed the danger that increasing wages too far would undermine that goal and could entrench rising prices.
However, the Bank of England has been more focused on pay in the private sector, which has risen faster than public-sector pay and has a more immediate impact on the prices of goods and services used to calculate consumer price inflation.
At 8.7% in May, Britain's inflation rate was the highest among the world's big, rich economies.
Britain's total debt is just over 100% of GDP, slightly below the average among advanced economies.
($1 = 0.7653 pounds)
