Jeremy Hunt has suggested that the Treasury would find new money to settle a wave of UK strikes in a significant concession to public sector workers.
Speaking on Wednesday to the House of Commons Treasury committee, the chancellor made it clear that departments could ask for new money from central government and did not necessarily have to finance all pay deals from existing budgets.
His words address one of the concerns of public sector staff, especially teachers, who have complained that schools would need to make cuts to fund any pay agreement. The teaching unions this week rejected a pay offer partly on the grounds that it was not fully funded.
In response to questions from MPs, Hunt made it clear that he was willing to find new money for public sector pay deals once they were agreed.
“When we settle [the disputes], there will be a negotiation with [government] departments as to how much [of the additional cost] is borne by additional support from the Treasury and how much is borne by efficiencies and reprioritisations in departments,” he said.
The Treasury had previously insisted that all money for pay settlements had to come from existing budgets — although it had begun to soften its stance with health workers earlier this week, when health insiders claimed it had agreed to provide an additional £3bn to fund a deal with nurses.
Treasury officials recognise that other departments might need an even more generous injection of cash to solve their disputes because their budgets were already more stretched than those in the health service.
Hunt told the MPs the government would always provide additional funds in “exceptional circumstances”.
“This is a different situation [from normal] because inflation was so much higher than expected and therefore the pay settlements have ended up being higher than expected. There is a discussion with departments on how much help comes from the centre [of government] and we haven’t had that discussion yet,” he said.
Hunt also indicated that further support for schools was on the table, adding that he had made a commitment that “there will be no reduction in frontline services as a result of these pay awards”. He added that departments would still need to reprioritise their spending and make efficiency savings.
The chancellor also answered questions about the Budget and told MPs that the fragile state of the public finances still imposed significant constraints on what he would like to do as chancellor. This would include extending the corporation tax investment allowances for more than the next three years.