Theresa May set for next major U-turn after signalling public sector pay cap to be ditched

Downing Street officials have tried to temper expectations of an immediate change

Theresa May's officials indicate the Government's position on pay restraint is shifting (Getty)

Theresa May looked set for a major U-turn after signalling the Government could review the cap on public sector pay.

Downing Street officials said ministers have “heard the message” from the general election and know that voters are “weary” of austerity.

But in a sign of how politically difficult abandoning the cap will be for a Conservative party still committed to abolishing the deficit, Number 10 sources later tried to play down talk of an imminent change.

Pay levels for nurses, teachers and police officers have been held back since 2010 and were set to be until at least 2019, but wage restraint could now be reviewed within months.

There has been intense pressure to reverse austerity from Labour, NHS staff and others who are warning lives are at risk from continued cuts, while a series of emergencies has also thrust the role of public sector workers into the spotlight.

A Downing Street source said on Wednesday: “Ministers, including the Prime Minister and the Chancellor, have been clear that we are going to listen to the messages that were sent at the election.

“We understand that people are weary after years of hard work to rebuild the economy.

“Public sector pay restraint is one of the tough choices we've had to make to balance the books after Labour's crash and what was left behind. We are working through and looking at recommendations from pay bodies that are coming.”

He said ministers are ready to consider upcoming recommendations from public sector review bodies which could bust the cap, set to save the Government some £5bn up to 2020.

The issue would also be up for review in Chancellor Philip Hammond's Autumn Statement, though officials signalled the Government is still committed to abolishing the deficit in the middle of the next Parliament.

Shortly after the officials had answered questions about potential alterations to the policy, Downing Street put out a clarification saying "there is no change" to the pay-cap as it stands.

The move was an apparent bid to prevent stories of a new major public spending commitment getting out of hand, but No10 still did not rule out scrapping the cap in the future.

Labour leader Jeremy Corbyn tabled an amendment to the Queen’s Speech on Wednesday demanding the cap be scrapped to give emergency workers and others “a fair pay rise”.

A senior Labour source said: “I think it is clear that one of the results of the election and the very sharply increased Labour vote and number of seats, and the fact that this is now a minority government, means that they have had to make a number of important concessions to the public.”

Shadow Home Secretary Diane Abbott used a speech in the Commons to push the point home saying: “In times of national and personal crisis it is to public sector workers the country looks.

“We've all seen and read about the firefighters who ran towards danger and into the blaze in Grenfell Tower to save lives and some of us must have wondered whether we could have summoned that courage.”

Public sector workers have seen the value of their incomes fall in relation to inflation after two years of pay freezes and four years of annual caps since 2010.

The Conservatives announced a further four years of one per cent caps in the 2015 budget, leaving rises well below inflation which has risen to 2.9 per cent.

Previous recommendations from pay review bodies which over-reached the cap have been ignored.

But in recent days two cabinet ministers, Chris Grayling and Michael Fallon, have both indicated a review is coming.

National officer of the GMB union Rehana Azam said: “This is one Theresa May U-turn we welcome, but our members won't take the Government's word for it.”

She added: “The devil will be in the detail – all public sector workers must now receive an above inflation pay rise, including those not covered by a pay review body such as council workers, school support staff and police staff.”

TUC general secretary Frances O'Grady said: “It's about time that hard-working public sector workers got the pay rise they've earned.

“If the cap is lifted, it will be a massive victory for trade union campaigning.

“But this can't be kicked into the long grass, it needs to happen now. Public sector workers have waited long enough.”