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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.

More on Inflation

“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.”

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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

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.”

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Trump trade war escalation sparks global market sell-off

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Trump trade war escalation sparks global market sell-off

Donald Trump’s trade war escalation has sparked a global sell-off, with US stock markets seeing the biggest declines in a hit to values estimated above $2trn.

Tech and retail shares were among those worst hit when Wall Street opened for business, following on from a flight from risk across both Asia and Europe earlier in the day.

Analysis by the investment platform AJ Bell put the value of the peak losses among major indices at $2.2trn (£1.7trn).

The tech-focused Nasdaq Composite was down 5.8%, the S&P 500 by 4.3% and the Dow Jones Industrial Average by just under 4% at the height of the declines. It left all three on course for their worst one-day losses since at least September 2022 though the sell-off later eased back slightly.

Trump latest: UK considers tariff retaliation

Analysts said the focus in the US was largely on the impact that the expanded tariff regime will have on the domestic economy but also effects on global sales given widespread anger abroad among the more than 180 nations and territories hit by reciprocal tariffs on Mr Trump‘s self-styled “liberation day”.

They are set to take effect next week, with tariffs on all car, steel and aluminium imports already in effect.

Price rises are a certainty in the world’s largest economy as the president’s additional tariffs kick in, with those charges expected to be passed on down supply chains to the end user.

The White House believes its tariffs regime will force employers to build factories and hire workers in the US to escape the charges.

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The latest numbers on tariffs

Economists warn the additional costs will add upward pressure to US inflation and potentially choke demand and hiring, ricking a slide towards recession.

Apple was among the biggest losers in cash terms in Thursday’s trading as its shares fell by almost 9%, leaving it on track for its worst daily performance since the start of the COVID pandemic.

Concerns among shareholders were said to include the prospects for US price hikes when its products are shipped to the US from Asia.

Other losers included Tesla, down by almost 6% and Nvidia down by more than 6%.

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PM: It’s ‘a new era’ for trade and economy

Many retail stocks including those for Target and Footlocker lost more than 10% of their respective market values.

The European Union is expected to retaliate in a bid to put pressure on the US to back down.

The prospect of a tit-for-tat trade war saw the CAC 40 in France and German DAX fall by more than 3.4% and 3% respectively.

The FTSE 100, which is internationally focused, was 1.6% lower by the close – a three-month low.

Financial stocks were worst hit with Asia-focused Standard Chartered bank enduring the worst fall in percentage terms of 13%, followed closely by its larger rival HSBC.

Among the stocks seeing big declines were those for big energy as oil Brent crude costs fell back by 6% to $70 due to expectations a trade war will hurt demand.

The more domestically relevant FTSE 250 was 2.2% lower.

A weakening dollar saw the pound briefly hit a six-month high against the US currency at $1.32.

There was a rush for safe haven gold earlier in the day as a new record high was struck though it was later trading down.

Sean Sun, portfolio manager at Thornburg Investment Management, said of the state of play: “Markets may actually be underreacting, especially if these rates turn out to be final, given the potential knock-on effects to global consumption and trade.”

He warned there was a big risk of escalation ahead through countermeasures against the US.

Read more:
Trump tariff saga far from over
‘Liberation Day’ explained
What Sky correspondents make of Trump’s tariffs

Sandra Ebner, senior economist at Union Investment, said: “We assume that the tariffs will not remain in place in the
announced range, but will instead be a starting point for further negotiations.

“Trump has set a maximum demand from which the level of tariffs should decrease”.

She added: “Since the measures would not affect all regions and sectors equally, there will be winners and losers as in 2018 – although the losers are more likely to be in the EU than in North America.

“To protect companies in Europe from the effects of tariffs, the EU should not respond with high counter-tariffs. In any case, their impact in the US is not likely to be significant. It would be more efficient to provide targeted support to EU companies in the form of investment and stimulus.”

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British businesses issue warning over ‘deeply troubling’ Trump tariffs

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British businesses issue warning over 'deeply troubling' Trump tariffs

British companies and business groups have expressed alarm over President Donald Trump’s 10% tariff on UK goods entering the US – but cautioned against retaliatory measures.

It comes as Business Secretary Jonathan Reynolds launched a consultation with firms on taxes the UK could implement in response to the new levies.

Money blog: Pension top-up deadline days away

A 400-page list of 8,000 US goods that could be targeted by UK tariffs has been published, including items like whiskey and jeans.

On so-called “Liberation Day”, Mr Trump announced UK goods entering the US will be subject to a 10% tax while cars will be slapped with a 25% levy.

The government’s handling of tariff negotiations with the US to date has been praised by representative and industry bodies as being “cool” and “calm” – and they urged ministers to continue that approach by not retaliating.

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The latest numbers on tariffs

Business lobby group the CBI (Confederation of British Industry) said: “Retaliation will only add to supply chain disruption, slow down investment, and stoke volatility in prices”.

Industry body the British Retail Consortium (BRC) also cautioned: “Retaliatory tariffs should only be a last resort”.

‘Deeply troubling’

While a major category of exports, in the form of services – like finance and information technology (IT) – has been exempted from the tariffs, the impact on UK business is expected to be significant.

Mr Trump’s announcement was described as “deeply troubling for businesses” by the CBI’s chief executive Rain Newton-Smith.

Read more:
US tariffs spark global market sell-off

Do Trump’s numbers add up?
Island home only to penguins hit by tariffs

The Federation of Small Businesses (FSB) also said the tariffs were “a major blow” to small and medium companies (SMEs), as 59% of small UK exporters sell to the US. It called for emergency government aid to help those affected.

“Tariffs will cause untold damage to small businesses trying to trade their way into profit while the domestic economy remains flat,” the FSB’s policy chair Tina McKenzie said. “The fallout will stifle growth” and “hurt opportunities”, she added.

Companies will need to adapt and overcome, the British Export Association said, but added: “Unfortunately adaptation will come at a cost that not all businesses will be able to bear.”

Watch dealer and component seller Darren Townend told Sky News the 10% hit would be “painful” as “people will buy less”.

“I am a fan of Trump, but this is nuts,” he said. “I expect some bad months ahead.”

Industry body Make UK said the 25% tariffs on cars, steel and aluminium would in particular be devastating for UK manufacturing.

Cars hard hit

Carmakers are among the biggest losers from the world trade order reshuffle.

Auto industry body the Society of Motor Manufacturers and Traders (SMMT) said the taxes were “deeply disappointing and potentially damaging measure”.

“These tariff costs cannot be absorbed by manufacturers”, SMMT chief executive Mike Hawes said. “UK producers may have to review output in the face of constrained demand”.

The new taxes on cars took effect on Thursday morning, while the measures impacting car parts are due to come in on 3 May.

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Trump trade war: The blunt calculation that should have spared UK from reciprocal tariffs

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Trump trade war: The blunt calculation that should have spared UK from reciprocal tariffs

Economists immediately started scratching their heads when Donald Trump raised his tariffs placard in the Rose Garden on Wednesday. 

On that list he detailed the rate the US believes it is being charged by each country, along with its response: A reciprocal tariff at half that rate.

So, take China for example. Donald Trump said his team had run the numbers and the world’s second-largest economy was implementing an effective tariff of 67% on US imports. The US is responding with 34%.

Trump latest: UK considers tariff retaliation

How did he come up with that 67%? This is where things get a bit murky. The US claims it studied its trading relationship with individual countries, examining non-tariff barriers as well as tariff barriers. That includes, for example, regulations that make it difficult for US exporters.

However, the actual methodology appears to be far cruder. Instead of responding to individual countries’ trade barriers, Trump is attacking those enjoying large trade surpluses with the US.

A formula released by the US trade representative laid this bare. It took the US’s trade deficit in goods with each country and divided that by imports from that country. That figure was then divided by two.

More on Donald Trump

So, in the case of China, which has a trade surplus of $295bn on total US exports of $438bn, that gives a ratio of 68%. The US divided that by two, giving a reciprocal tariff of 34%.

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PM will ‘fight’ for deal with US

This is a blunt measure which targets big importers to the US, irrespective of the trade barriers they have erected. This is all part of Donald Trump’s efforts to shrink the country’s deficit – although it’s US consumers who will end up paying the price.

But what about the small number of countries where the US has a trade surplus? Shouldn’t they actually be benefiting from all of this?

Read more:
Trump tariff saga far from over
‘Liberation Day’ explained
What Sky correspondents make of Trump’s tariffs

That includes the UK, with whom the US has a surplus (by its own calculations) of $12bn. By its own reciprocal tariff formula, the UK should be benefitting from a “negative tariff” of 9%.

Instead, it has been hit by a 10% baseline tariff. Number 10 may be breathing a sigh of relief – the US could, after all, have gone after us for our 20% VAT rate on imports, which it takes issue with – but, by Trump’s own measure, we haven’t got off as lightly as we should have.

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