LONDON (AP) — The British new minister of finance said on Sunday she will run the economy with “iron discipline” but suggested she will give public sector workers an above-inflation pay rise to end a wave of strikes and fight.
The Labour Party Government is under pressure from supporters and unions to spend more on salaries and social services, two weeks after being elected on a promise not to raise personal taxes or increase government debt,
“I think people know the situation is a mess,” the finance minister said Rachel Reeves told the BBC, arguing that the previous Conservative government “had brought public services to their knees, a tax burden at its highest level in 70 years, and a debt almost as big as our entire economy.”
“I’m going to be honest with people about the scale of the challenge and then start fixing the foundations,” she said. “I’m going to run our economy with iron discipline and bring back stability.”
The centre-left Labour Party won a overwhelming election victory on July 4 over a pledge to grow the UK’s sluggish economy, unleash a wave of housing and green energy projects and fix the country’s problems damaged public services.
It faces a cautious, weary electorate eager to seek relief from a cost of living shrinks which saw interest rates rise above 11% by the end of 2022 after Russia’s invasion of Ukraine and short-term Conservative Prime Minister Liz Truss’s tax cut plans.
Inflation has fallen back to 2%, and Prime Minister Keir Starmer’s the government wants to end strikes by thousands of hospital doctors that have further strained the creaking, state-funded National Health Service. Nurses, teachers, rail workers and other public sector workers have also gone on strike in the past year to demand higher pay.
The Times of London reported that the independent bodies that advise on public sector pay had recommended a 5.5% pay rise for teachers and about 1.3 million NHS workers. Paul Johnson, director of the Institute for Fiscal Studies think tank, said this could cost the government £3 billion ($3.9 billion) more than budgeted.
Reeves, the country’s first female finance minister, said the government will review the recommendations and find a way to give workers a pay rise and “make the numbers add up.”
“There are costs of not settling, costs of further strikes, costs in terms of the challenge we face in recruiting and retaining doctors, nurses and teachers,” she said.
The government is also under pressure from anti-poverty groups and many Labour lawmakers to scrap a policy introduced by the Conservatives that limits broadly paid welfare and tax credits to a family’s first two children. The new government says it cannot afford to scrap the two-child cap.
Conservative MP Jeremy Hunt, Reeves’ predecessor as Chancellor of the Exchequer, said it was “complete nonsense” to claim his party had left the economy in its worst state in decades after 14 years in power.
“She wants to lay the groundwork for tax increases,” he said of Reeves. “She should have been honest about that before the election.”
