Theresa May agrees to scrap seven-year cap on public sector pay rises after pressure from senior MPs to win back voters
The lifting of the pay cap is expected to dominate Chancellor Philip Hammond's autumn budget
THERESA May will lift weary state workers’ seven year pay cap this month as the centre piece of a fresh bid to reconnect with angry voters.
No10 aides are drawing up a series of major policies away from Brexit to try to win back the PM’s authority to stay on in No10.
The Sun can reveal that the “jewel” in the package will be ending the 1% cap on rises for all public sector workers.
But because of the huge £4bn a year cost of the move, it will be done gradually over two years.
Under one plan favoured by ministers, the lowest paid and professions with the biggest retention problems – such as nursing and senior leaders across the civil service – will see the first rises, from April next year.
Pay hikes of at least the rate of inflation, currently 2.6%, will be authorised by ministers.
That would see the pay of the average nurse of £31,600 a year go up by at least £820.
A police constable on £28,000 will see a rise of £730 minimum.
And a newly qualified teacher on £23,000 will get an annual hike of at least £600.
Confirmation of the major policy change will come later this month when Treasury Chief Secretary Liz Truss despatches the annual guidance letters to pay review bodies to calculate next year’s pay levels for five million public sector workers.
Ending the cap is also backed by Chancellor Philip Hammond.
He has been persuaded by warnings from ministers including Health Secretary Jeremy Hunt that the public sector is facing a growing exodus.
A senior Whitehall source said: “The PM and the Chancellor think the government need to show we understand the value of people’s service, not just the price of it.
“Being taken for granted for a long time is why people are getting tired with austerity.”
A Treasury source added: “Lifting the cap and how we pay for it is the biggest domestic issue for us this Autumn. It will dominate the Budget”.
The move will delight many worried Tory MPs, who have threatened a rebellion that could see the Budget defeated in November.
Commons Treasury Committee chair Nicky Morgan welcomed the move last night.
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The ex-Tory Cabinet minister said: “Public sector pay was clearly an issue in the election, and when I was Education Secretary we saw it was having an effect on recruitment.
“But as a fiscally responsible government it’s got to be done in a way that doesn’t undermine the hard work of balancing the books of the last seven years.”
Mrs May also faced a Cabinet revolt over the summer when senior ministers spoke out in favour of ditching the cap.
They included Defence Secretary Sir Michael Fallon and Foreign Secretary Boris Johnson.
Public sector workers’ pay was frozen in the financial years 2011-12 and 2012-13 – except for the lowest earners.
Rises were then limited to an average of 1% from 2013-14 to 2015-16, and then capped at 1% again for the next four years.
Once inflation is taken into account, pay has fallen in real terms since 2010 for the majority of state workers - leaving the average employee’s wages £1,000 lower than they were then.
It also emerged yesterday that teachers are more than £5,000 a year worse off on average in real terms than in 2010, according to Labour analysis of official data.
A HM Treasury spokesperson said: “This is speculation”.
Former Tory chairman Grant Shapps was one of a series of senior Tory MPs to hold a crisis meeting in No10 over abolishing the cap in June.
Mr Shapps added: “This is a common sense thing to be doing, and it delivers on the PM’s mantra for the Just About Managing”.