Millions of public sector workers could be offered pay rises in return for smaller pensions

31 December 2024, 14:38 | Updated: 31 December 2024, 14:43

Millions of Brits working in the public sector could be offered higher salaries in return for lower pensions under plans to avoid strike action next year, it has been revealed.

Teachers, nurses, civil servants and others working in the public sector could see their healthy pensions slashed in return for bigger pay packets in the hopes of reducing staffing problems without adding extra burden to the taxpayer.

Cat Little, permanent secretary to the Cabinet Office, has said that she is reviewing “the balance between pay and pensions”, and has begun conversations within Whitehall. 

The Treasury is yet to be consulted on the plan but is expected to express concern as it would require borrowing tens of billions of pounds in the short term, The Times reports.

Labour has already promised to fund pay rises of 2.8% next year, which is just above the 2.6% rate of inflation expected in 2025.

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The public sector pensions bill  is expected to reach more than £36 billion next year due to the measure. 

It comes after the Labour government settled a series of long-running strikes by dishing out pay rises across the public sector. 

The Treasury has previously said it will only fund pay rises of 2.8% a year. This has sparked concerns of further industrial action unless it forks out extra cash amid backlash from unions.

 Paul Nowak, general secretary of the TUC, has said this is not a “serious” figure and has warned more will be needed to address the issues across the country’s public services. 

He said in a message to ministers: "If you are serious about repairing and renewing our public services, you have to be serious about public service pay.

'It's hard to see how a 2.8% rise addresses the recruitment and retention crisis across the public sector, with 150,000 staff vacancies in the NHS alone."

The British Medical Association (BMA) said there was a "very real risk" of more strike action if "pay erosion" was not addressed, while Unison has called the proposal a "bitter pill".

The National Education Union said the offer fell "well short of the urgent action needed".

This is despite the Department for Education saying the pay increase would "maintain the competitiveness of teachers' pay despite the challenging financial backdrop the government is facing".

A Government spokesman said: 'We are focused on supporting the civil service with the necessary tools it needs to deliver change for working people'.