Funding public sector pay rises means trade-offs Tories cannot stomach

Good morning. Public sector pay is a problem for the government on two fronts. The first is the thing that makes news: industrial disputes, strikes, and planned outages.

The second is the thing that we don’t read about but everyone in the UK experiences, whether they realise it or not: people leaving the public sector for better pay — whether in the UK’s private sector or in another country altogether.

Jeremy Hunt has a plan to tackle that without the need for extra government borrowing: but will it work? Some thoughts on that below.

Hunt for cuts

The chancellor has ordered ministers to find £2bn of savings in their budgets to fund 6 per cent increases in public sector pay rises this year.

(Yes, it’s true that on average, your pension is more generous in the public sector, but that gap has closed somewhat in recent years, and in any case, the average thirtysomething teacher or doctor can’t spend their pension today.)

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

Given the political limitations Jeremy Hunt finds himself in, he badly needs to do something on wages to bring an end to the various industrial disputes across the public sector, and to address some of the staff shortages.

There is no prospect of getting further tax rises past the parliamentary party, while the government has set itself against measures that divide Conservative MPs, such as planning reform. Though Rishi Sunak has pursued pro-growth policies in European affairs in many respects — resolving the running tensions over the Northern Ireland protocol, the looming deal over the EU’s flagship Horizon scientific research programme — there is no prospect of any big changes to the EU-UK trade deal.

So if you don’t want to increase borrowing, cuts elsewhere are the only game in town. Now, I don’t think this is particularly deliverable, either. As Nigel Lawson once said, the problem isn’t getting Conservative MPs to accept tax rises: it’s getting them to sign off any spending cuts.

That was one of the missing puzzle pieces under Liz Truss’s premiership: she was happy to unveil a multibillion package of tax cuts, but there was never any prospect that Tory MPs would sign off a concomitant set of spending reductions.

This, I think, is where British politics is stuck until we have a change of government, or some unprecedented event shifts the internal balance of forces in the Tory party.

Will Labour be able to break that cycle? “Probably not” was Martin Wolf’s verdict in his column earlier this week.

Your verdict on Jeremy Hunt’s Mansion House speech and whether the proposals go far enough to deliver UK growth? In yesterday’s poll, some 56 per cent of voters were on the side of “no, his ideas were dreadful”, 14 per cent thought yes and 30 per cent were on the fence.

Now try this

I had a lovely evening yesterday: I went to dinner at Lahore Kebab House (do read Zehra Munir’s excellent piece on it here) before seeing the latest Mission Impossible film, which is every bit as delightful as Danny Leigh’s review suggests (do read that here).

While there are no restaurant or cultural recommendations from me in the latest FT Talent podcast, I did talk a bit about my route into journalism and how we make Inside Politics: listen here.

Top stories today

• Regional inequality | Almost half of net jobs growth in England since 2010 has been in London and the South East, a report by a leading think-tank has found, citing centralisation, short-termism and chronic low investment outside the capital.

• Fresh allegations | The BBC reported that a second person had come forward with new claims of abusive behaviour by a top presenter already accused of paying money for explicit pictures of a young person.

• Unlocking pension funds | The government is considering options to make it easier for private sector employers to access tens of billions of pounds of surplus funds that have built up in their pension schemes, as part of wider plans to stimulate economic growth.

• Truss’s new project | Today Liz Truss will back a panel of 13 international economists commissioned to investigate “pro-competition” policy reforms and restore credibility to her “pro-growth” political agenda.