Rishi Sunak hints at blocking public sector pay rises as he attacks ‘completely unreasonable’ doctors’ strikes

Published

2 years ago

June 26, 2023

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Rishi Sunak has hinted he will ignore recommendations for public sector pay rises, saying workers “need to recognise the economic context we are in”.

Reports surfaced over the weekend that the prime minister planned to block upcoming proposals from public sector pay bodies in an attempt to tackle soaring inflation in the country.

And health minister Helen Whately refused to commit to the uplift during an interview with Sky News on Monday morning.

Unions and opposition parties have hit out at the rumoured decision, saying inflation was not being driven by the wages of nurses and teachers, but by the economic decisions taken by the Conservatives over their 13 years in power.

Politics live: ‘Seriously?’ – Labour responds to lack of commitment on pay rises

Last week, the Office for National Statistics confirmed inflation was stuck at 8.7% and the Bank of England raised interest rates to 5% – a 15-year high.

Asked by broadcasters today whether public sector pay was a major driver of that inflation, Mr Sunak said: “Government borrowing is something that would make inflation worse, so the government has to make priorities and decisions about where best to target our resources.

“And that’s why when it comes to public sector pay, we need to be fair, but we need to be responsible as well.”

Pay review bodies or PRBs take evidence from across sectors like the NHS and education each year, as well as submissions from government, before saying what wage rises should be introduced for the following 12 months.

Amid anger from unions about the figures failing to match inflation last year, Health Secretary Steve Barclay insisted it was right for ministers to “continue to defer to that process to ensure decisions balance the needs of staff and the wider economy”.

The PRBs’ recommendations are expected to be published next month, alongside formal pay offers, with reports claiming they could be around 6% for the health service and 6.5% for teachers.

But while being questioned on public sector pay, Mr Sunak said: “It is important that we don’t make the inflation situation worse and it is important we prioritise the things that are right.

“I am making the decisions that are right for the long term and that is what I am going to continue doing.”

TUC general secretary Paul Nowak accused the government of “playing politics with working people’s incomes”, adding: “It risks permanent economic harm – and will undoubtedly damage recruitment and retention of staff in our vital public services.

“Instead of blaming workers who can’t afford to put food on the table or petrol in their cars to get to work, ministers should focus on a credible plan for sustainable growth and rising living standards.”

The joint general secretary of the National Education Union, Kevin Courtney, also claimed Mr Sunak was “laying the groundwork for a further real-terms pay cut and one that flies in the face of the recommendations of the pay review body”, demanding the reviews be published as soon as possible.

Labour’s shadow health secretary, Wes Streeting, did not commit to his party accepting the recommendations were they to win power at the next election, but he did say he wanted PRBs “back up and running with the full confidence of everyone involved”.

He added: “It is not working people that have driven our economy off the cliff, it is the Conservative Party. We are still paying through the nose for that disastrous mini-budget that all of those Conservative MPs cheered on.

“People are paying through the nose on their mortgages, paying through the nose with their bills going up and their weekly shop, paying through the nose with rising energy bills, and Britain is an outlier when you look at other economies.

“That’s why we need a serious plan to get growth back into the economy.”

Government pay position offers Labour opportunity and challenge

Tamara Cohen

Political correspondent

@tamcohen

The government’s wavering position on NHS pay presents Labour with both an opportunity and a challenge.

On the plus side, they can point to the fact the position of ministers seems at odds with what they were saying back in December.

Then, the government argument went that it was not for them to decide how much nurses, teachers, or police officers should be paid because this is determined by independent pay review bodies.

Now, they are suggesting the opposite – with health minister Helen Whately the latest to refuse to commit to following recommendations if the government judges they are not affordable.

Labour’s Emily Thornberry was withering in her interview with Sky News this morning: “I mean, seriously – do they really have a policy at all?”

Highlighting government inconsistency on political issues of this sort is exactly what you would expect an opposition party to do.

But it’s not entirely straightforward for Labour. They know there are questions that follow which could be challenging for the party.

Would they commit, for example, to following all pay review body recommendations in power?

Around half of public sector workers are covered by them (civil servants are not), but they are not binding, although Conservative governments have ignored their recommendations more than Labour did in power.

And given Labour agrees with the government that inflation needs to come down, and agrees with the Bank of England that interest rates needed to rise – how comfortable will they be supporting potentially inflationary public sector pay hikes?

The reports come while strike action by junior doctors over pay and conditions continues, with unions planning a five-day walkout next month.

Calling for pay restoration equating to a 35% rise, the British Medical Association (BMA) said wages had decreased by more than a quarter since 2008 when inflation was taken into account, and many doctors were burnt out from an increasing workload.

But when asked why he wouldn’t pay the profession more, the prime minister hit out at the industrial action and called the BMA’s demands “totally unreasonable”.

Mr Sunak said: “I think everyone can see the economic context we are in, with inflation higher than we’d like it, and it is important in that context that the government makes the right and responsible decisions in things like public sector pay.

“It is very disappointing that junior doctors have taken the decision that they have done. Over half a million people’s treatments have already been disrupted and I don’t think anyone wants to see that carry on – it’s just going to make it harder to bring waiting lists down.”

He added: “And I think people need to recognise the economic context we are in, and I am going to make the decisions that are the right ones for the country.

“That’s not always easy, people may not like that, but those are the right things for everybody, that we get a grip on inflation, and that means the government not excessively borrowing too much money and being responsible with public sector pay settlements.

“That is what I am going to do and I would urge everyone to see that is the right course of action.”

Labour’s Mr Streeting said he understood the “pain junior doctors are feeling in their pockets”, and while pay restoration for doctors could not happen “overnight”, staff understood that – and it was for Mr Sunak to fix it.

“I think the important thing is the prime minister has now got to grip this and get around the negotiating table to negotiate an end to this strike action,” he added. “Because every time we see strikes in the NHS we see delays and cancelled operations.

“The real risk to the NHS now isn’t just that staff walk out for another five days of strike action, but they walk out of the NHS altogether.

“If Rishi Sunak can sit there for an hour negotiating gongs and peerages for Conservative Party donors, supporters and MPs, he can sit around the table for an hour with junior doctors and put patients out of their misery.”

Business

AA owners line up banks to steer path towards £4.5bn exit

Published

9 hours ago

May 24, 2025

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AA owners line up banks to steer path towards £4.5bn exit

The owners of the AA, Britain’s biggest breakdown recovery service, are lining up bankers to steer a path towards a sale or stock market listing next year which could value the company at well over £4bn.

Sky News has learnt that JP Morgan and Rothschild are in pole position to be appointed to conduct a review of the AA’s strategic options following a recovery in its financial and operating performance.

The AA, which has more than 16 million customers, including 3.3 million individual members, is jointly owned by three private equity firms: Towerbrook Capital Partners, Warburg Pincus and Stonepeak.

Insiders said this weekend that any form of corporate transaction involving the AA was not imminent or likely to take place for at least 12 months.

They added that there was no fixed timetable and that a deal might not take place until after 2026.

Nevertheless, the impending appointment of advisers underlines the renewed confidence its shareholders now have in its prospects, with the business having recorded four consecutive years of customer, revenue and earnings growth.

A strategic review of the AA’s options is likely to encompass an outright sale, listing on the public markets or the disposal of a further minority stake.

Stonepeak invested £450m into the company in a combination of common and preferred equity, in a transaction which completed in July last year.

That deal was undertaken at an enterprise valuation – comprising the AA’s equity and debt – of approximately £4bn, the shareholders said at the time.

Given the company’s growth and the valuation at which Stonepeak invested, any future transaction would be unlikely to take place with a price of less than £4.5bn, according to bankers.

The AA, which has a large insurance division as well as its roadside recovery operations, remains weighed down by a substantial – albeit declining – debt burden.

Its most recent set of financial results disclosed that it had £1.9bn of net debt, which it is gradually paying down as profitability improves.

AA owners over the years

The company has been through a succession of owners during the last 25 years.

In 1999, it was bought by Centrica, the owner of British Gas, for £1.1bn.

It was then sold five years later to CVC Capital Partners and Permira, two buyout firms, for £1.75bn, and sat under the corporate umbrella Acromas alongside Saga for a decade.

The AA listed on the London Stock Exchange in 2014, but its shares endured a miserable run, being taken private nearly seven years later at little more than 15% of its value on flotation.

Under the ownership of Towerbrook and Warburg Pincus, the company embarked on a long-term transformation plan, recruiting a new leadership team in the form of chairman Rick Haythornthwaite – who also chairs NatWest Group – and chief executive Jakob Pfaudler.

For many years, the AA styled itself as “Britain’s fourth emergency service”, competing with fierce rival the RAC for market share in the breakdown recovery sector.

Founded in 1905 by a quartet of driving enthusiasts, the AA passed 100,000 members in 1934, before reaching the one million mark in 1950.

Last year, it attended 3.5 million breakdowns on Britain’s roads, with 2,700 patrols wearing its uniform.

The company also operates the largest driving school business in the UK under the AA and BSM brands.

In the past, it has explored a sale of its insurance arm, which also has millions of customers, at various points but is not actively doing so now.

By recruiting a third major shareholder last, the AA mirrored a deal struck in 2021 by the RAC.

The RAC’s then owners – CVC Capital Partners and the Singaporean state fund GIC – brought the technology-focused private equity firm, Silver Lake, in as another major investor.

A spokesman for the AA declined to comment on Saturday.

Business

US-EU trade war fears reignite as Europe strikes back at Trump’s threat

Published

17 hours ago

May 24, 2025

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US-EU trade war fears reignite as Europe strikes back at Trump's threat

Fears of a US-EU trade war have been reignited after Europe refused to back down in the face of fresh threats from Donald Trump.

The word tariff has dominated much of the US president’s second term, and he has repeatedly and freely threatened countries with them.

Money blog: Trump sends message to UK on energy bills

This included the so-called “liberation day” last month, where he unleashed tariffs on many of his trade partners.

On Friday, after a period of relative calm which has included striking a deal with the UK, he threatened to impose a 50% tariff on the EU after claiming trade talks with Brussels were “going nowhere”.

The US president has repeatedly taken issue with the EU, going as far as to claim it was created to rip the US off.

However, in the face of the latest hostile rhetoric from Mr Trump’s social media account, the European Commission – which oversees trade for the 27-country bloc – has refused to back down.

EU trade chief Maros Sefcovic said: “EU-US trade is unmatched and must be guided by mutual respect, not threats.

“We stand ready to defend our interests.”

Fellow EU leaders and ministers have also held the line after Mr Trump’s comments.

Polish deputy economy minister Michal Baranowski said the tariffs appeared to be a negotiating ploy, with Dutch deputy prime minister Dick Schoof said tariffs “can go up and down”.

French trade minister Laurent Saint-Martin said the latest threats did nothing to help trade talks.

He stressed “de-escalation” was one of the EU’s main aims but warned: “We are ready to respond.”

Mr Sefcovic spoke with US trade representative Jamieson Greer and commerce secretary Howard Lutnick after Mr Trump’s comments.

Mr Trump has previously backed down on a tit-for-tat trade war with China, which saw tariffs soar above 100%.

Sticking points

Talks between the US and EU have stumbled.

In the past week, Washington sent a list of demands to Brussels – including adopting US food safety standards and removing national digital services taxes, people familiar with the talks told Reuters news agency.

In response, the EU reportedly offered a mutually beneficial deal that could include the bloc potentially buying more liquefied natural gas and soybeans from the US, as well as cooperation on issues such as steel overcapacity, which both sides blame on China.

Stocks tumble as Trump grumbles

Major stock indices tumbled after Mr Trump’s comments, which came as he also threatened to slap US tech giant Apple with a 25% tariff.

The president is adamant that he wants the company’s iPhones to be built in America.

The vast majority of its phones are made in China, and the company has also shifted some production to India.

Shares of Apple ended 3% lower and the dollar sank 1% versus the Japanese yen and the euro rose 0.8% against the dollar.

Business

British taxpayers’ £10.2bn loss on bailout of RBS

Published

23 hours ago

May 23, 2025

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British taxpayers' £10.2bn loss on bailout of RBS

British taxpayers are set to swallow a loss of just over £10bn on the 2008 rescue of Royal Bank of Scotland (RBS) as the government prepares to confirm that it has offloaded its last-remaining shares in the lender as soon as next week.

Sky News can reveal the ultimate cost to the UK of saving RBS – now NatWest Group – from insolvency is expected to come in at about £10.2bn once the proceeds of share sales, dividends and fees associated with the stake are aggregated.

The final bill will draw a line under one of the most notorious bank bailouts ever orchestrated, and comes nearly 17 years after the then chancellor, Lord Darling, conducted what RBS’s boss at the time, Fred Goodwin, labelled “a drive-by shooting”.

Money latest: Brits urged to leave energy price cap

Insiders believe a statement confirming the final shares have been sold could come in the latter part of next week, although there is a chance that timetable could be extended by a number of days.

The chancellor, Rachel Reeves, is likely to make a statement about the milestone, although insiders say the Treasury and the bank are keen to simply mark the occasion by thanking British taxpayers for their protracted support.

A stock exchange filing disclosing that taxpayers’ stake had fallen below 1% was made last week, down from over 80% in the years after the £45.5bn bailout.

The stake now stands at 0.26%, meaning the final shares could be offloaded as early as the middle of next week, depending upon demand.

Total proceeds from a government trading plan launched in 2021 to drip-feed NatWest stock into the market have so far reached £12.8bn.

Based on the bank’s current share price, the remaining shares should fetch in the region of £400m, taking the figure to £13.2bn.

In addition, institutional share sales and direct buybacks by NatWest of government-held stock have yielded a further £11.5bn.

Dividend payments to the Treasury during its ownership have totalled £4.9bn, while fees and other payments have generated another £5.6bn.

In aggregate, that means total proceeds from NatWest since 2008 are expected to hit £35.3bn.

Under Rick Haythornthwaite and Paul Thwaite, now the bank’s chairman and chief executive respectively, NatWest is now focused on driving growth across its business.

It recently tabled an £11bn bid to buy Santander UK, according to the Financial Times, although no talks are ongoing.

Mr Thwaite replaced Dame Alison Rose, who left amid the crisis sparked by the debanking scandal involving Nigel Farage, the Reform UK leader.

Sky News recently revealed that the bank and Mr Farage had reached an undisclosed settlement.

During the first five years of NatWest’s period in majority state ownership, the bank was run by Sir Stephen Hester, now the chairman of easyJet.

Sir Stephen stepped down amid tensions with the then chancellor, George Osborne, about how RBS – as it then was – should be run.

Lloyds Banking Group was also in partial state ownership for years, although taxpayers reaped a net gain of about £900m from that period.

Other lenders nationalised during the crisis included Bradford & Bingley, the bulk of which was sold to Santander UK, and Northern Rock, part of which was sold to Virgin Money – which in turn has been acquired by Nationwide.

NatWest declined to comment on Friday.

A Treasury spokesperson said: “We now own less than 1% of shares in NatWest which is a significant step towards returning the bank to private ownership and delivering value for money for taxpayers.

“We are on track to exit the shareholding soon, subject to sales achieving value for money and market conditions.”