Oh to be a fly-on-the-wall at today’s Cabinet meeting. After growing calls from ministers for Theresa May to ditch the public sector pay cap, last night the Chancellor put his foot down. In a speech to the CBI, Philip Hammond said that while the public are naturally ‘weary’ after seven years of austerity, now is not the time to ‘take our foot off the pedal’:
‘After seven long and tough years, the high wage, high growth economy for which we strive is tantalisingly close to being within our grasp. It would be easy to take our foot off the pedal. But instead we must hold our nerve and maintain our focus resolutely on the prizes that are so nearly within reach.’
Referring to the cap specifically, Hammond said the Government’s approach to the public sector pay cap had not changed:
‘Our policy on public sector pay has always been designed to strike the right balance between being fair to our public servants, and fair to those who pay for them. That approach has not changed, and we continually assess that balance.’
This isn’t to say that the cap will stay. Instead what Hammond is making clear is that – contrary to suggestions from a few of his colleagues since the snap election – there is still no magic money tree. And he will not risk the party’s economic record by borrowing more money in order to do so. This means that axing the cap would most likely need to be funding by tax rises or, as the Times reports, delaying a series of pre-announced tax cuts (to reduce corporation tax, raise the thresholds for the personal allowance and the 40 per cent income tax rate) to fund the increase.
What’s striking is that Hammond’s comments are being treated with a lot more authority than the various attempts by No 10 of late to dampen down speculation over the cap. The Prime Minister’s weakness has encouraged ministers to speak publicly and put pressure on a diminished Downing Street operation. Last night’s intervention shows that it’s May’s next door neighbour at No 11 who is the real obstacle to their demands.
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