Rachel Reeves has firmly stated that her government will not be issuing “blank cheques” to public sector unions, responding to criticism that Labour has become a soft target in the face of ongoing strikes.
The Chancellor, during a visit to Liverpool’s docklands to inspect a new rent-to-buy housing project, emphasized that there had been no capitulation to demands from train drivers or junior doctors.
She defended the government’s decision to adhere to pay review body recommendations for real-term salary increases for police, teachers, and the armed forces, arguing that these increases were essential to attract and retain staff in these critical sectors.
Reeves hinted that she might seek to expand borrowing capabilities by altering the way government debt is calculated to comply with fiscal rules.
Labour Faces Union and Public Pressure
In a pointed response to James Cleverly, a Conservative leadership hopeful who accused Labour of being manipulated by union demands, Reeves maintained that the decision to increase wages for key public sector workers was a necessity.
“We needed to draw a line under these economically damaging strikes,” she said, adding that the public had a right to expect reliable train services and unimpeded hospital appointments. Reeves stressed, “We have not given in to any demands, whether from train drivers or junior doctors.”
The Chancellor made no apologies for ensuring that police officers, military personnel, and teachers received an above-inflation pay rise for the first time in a decade.
She underscored the severe recruitment and retention challenges facing the armed forces, education, and the NHS, noting that ignoring pay review body recommendations would have had disastrous consequences.
Despite some unions pushing for “pay restoration” to compensate for years of austerity-driven cuts, Reeves was clear: “Keir Starmer and I decide our policy, not the trade unions. There are no blank cheques.”
Reeves has also faced calls from anti-poverty advocates and some Labour MPs to eliminate the two-child benefit cap, but she stopped short of making any promises.
She acknowledged the enormous challenges ahead, stating, “We can’t undo 14 years of damage in one budget. We have significant problems, and we simply can’t do everything people want or that we would like to do.”
Firmly rejecting comparisons to George Osborne’s austerity measures, Reeves highlighted that her budget was focused on correcting the public finances rather than shrinking the state.
“I have just delivered the first real-terms pay increase for public sector workers in a decade. That’s not austerity,” she asserted. Reeves admitted that while she doesn’t relish making cuts, her hand has been forced by the dire financial situation left by previous administrations.
Government Debt Rule Concerns
One potential change in the budget could involve revising the government’s debt rule. Currently, this rule requires that public debt decrease as a share of national income over five years, but it includes losses incurred by the Bank of England on bond purchases.
Economists suggest that excluding the Bank’s losses from the debt calculation could allow Reeves to borrow an additional £20 billion annually.
The Chancellor clarified that while she sees the debt rule as less crucial than ensuring that day-to-day spending is covered by tax revenues, the specific method for calculating debt will be outlined in the upcoming budget.
“It is reasonable for the government to borrow to invest,” she said, defending her decision to cancel certain road, rail, and hospital projects initiated by the previous government, citing a lack of allocated funding.
“You can’t deliver projects on the never-never. I won’t make promises without clear funding sources.”– Rachel Reeves.
The chancellor said slow growth was the reason taxes were at their highest for 70 years and public services were on their knees.
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