Jeremy Hunt: Chancellor says public sector pay rises will not be funded by more borrowing

As the UK prepares for a series of walkouts, speaking exclusively on ITV1's Peston, the Chancellor Jeremy Hunt said any public sector pay rises will have to come from existing budgets

The Chancellor Jeremy Hunt has ruled out extra borrowing as a way of funding public sector wage rises, meaning any pay awards would have to be from existing departmental budgets.

Speaking exclusively on ITV1's Peston, Mr Hunt insisted that further government borrowing would lead to higher inflation, further adding to suggestions the prime minister could over-rule the recommendations of public sector pay review bodies.

"I think if you talk to economists, what they would say of those two factors, the way you fund a pay rise is the most important factor," Mr Hunt told ITV News' Political Editor Robert Peston.

"Because in the end, if you fund any public sector pay rise by increasing borrowing that year, that pumps billions of pounds of extra money into the economy. And when companies can't meet the demand, when people try and spend that money, they react by putting up their prices.

"So the most important of those factors, not the exclusive entirety of the issue, but the most important thing is what I said, which is that we won't fund any public sector pay awards through additional borrowing."

It comes as a Downing Street source suggested a decision on public sector pay could be made by Rishi Sunak as soon as this week.

It's widely believed that official pay review bodies for employees such as teachers, junior doctors and police have recommended a pay rise between 6-6.5%, something Downing Street continues to say is "being considered" by Mr Sunak.

But both Mr Sunak and Mr Hunt have indicated they could overrule the pay review bodies, stressing the need to make difficult decisions in a bid to halve inflation.

"What I would just say is that it is very challenging," Mr Hunt told Peston.

Jeremy Hunt sat down with Robert Peston to talk about public sector pay, tax cuts and the BBC. Credit: HM Treasury/Flickr

While "an easy way out" would be to borrow more money, he added, it would leave "us having exactly the same really damaging strikes" in future when public sector workers again see their pay packets "eroded by inflation".

The Chancellor also strongly suggested there would be no tax cuts before the next election, saying: "People who want tax cuts, as I and every Conservative does, want to put more money in people's pockets.

"And the quickest way that I can put money into people's pockets and actually quite a large sum of money is to halve inflation - because compared to what would happen, if I didn't do that, that's putting an extra five pence in the pound into people's pockets, which is not being eaten up by increases in petrol prices, or their weekly food shop.

"So the battle against inflation is an immediate way where I can put spending power back into people's hands, they don't currently have."

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