IFS warns NHS and teacher pay rises could cost an extra £3bn

Pay rises for teachers and some NHS staff could cost an extra £3bn, the Institute for Fiscal Studies (IFS) has warned, if independent review bodies recommend pay rises above inflation.

According the timesBoth wage bodies have recommended increases of 5.5%, significantly higher than the 3% the government has budgeted.

IFS director Paul Johnson said the money would have to be raised through borrowing, tax increases or spending cuts as “there is no fourth option”.

A teachers’ union said a 5.5% pay rise would be a “step in the right direction” but added that strike action would “seem inevitable” if the recommendation was ignored.

The independent pay review bodies represent 514,000 teachers and 1.36 million NHS workers.

Speaking on BBC Radio 4’s Today programme, Johnson said he was not “terribly surprised” by the figure reported by the Times as it was “roughly what wages are rising by across the economy”.

If the 5.5% figure were replicated across the public sector, beyond the reported recommendations for teachers and the NHS, that would equate to £10bn of additional funding needed, he added.

The decision on the salary comes after last year. strike By teachers and a chain of Young doctors strikes calling for a better wage agreement.

Daniel Kebede, general secretary of the National Education Union, said the recommended figure would be a “step in the right direction” for schools.

“We are in the midst of a deep recruitment and retention crisis at the moment, and we need a pay plus inflation premium this year to take action to correct that crisis,” he told the Today programme.

It would be “highly problematic” for the government not to implement the 5.5% wage increase if that is the figure that has been recommended to them, he added.

“We absolutely want to avoid a strike, but that would seem almost inevitable if the Treasury were to intervene in such a way,” he added.

The Association of School and College Leaders said it would need assurances that the government would fund the pay rise “as school budgets are already under immense pressure and cannot sustain this additional cost”.

Recommending a level above inflation would represent a major challenge for Chancellor Rachel Reeves, who is due to present her first budget in the autumn.

Education Secretary Bridget Phillipson pledged to hire 6,500 new teachersand said the profession had been “disparaged, marginalized and denigrated” for too long.

Health Secretary Wes Streeting has started face-to-face talks with young doctors hoping to end a long-standing pay dispute.

Decisions on pay rises for NHS staff, teachers, police and prison guards in England are due to be made later this month, when Official public sector salary review process It should be completed by 2024-25.

A government spokesman said: “We value the vital contribution that the nearly six million public sector workers make to our country.

“The pay review process is ongoing and no final decisions have been made. We will update in due course, however we are under no illusions about the scale of the tax legacy we face.”

The BBC has contacted independent pay review bodies for comment.