NEW tax rises could be brought in to cover a £10 billion bill to pay for public sector pay rises, economists have warned.
Millions of teachers, nurses and other staff should be given above-inflation wage bumps, independent pay review bodies have recommended.
They have suggested 5.5 per cent pay rises for NHS and teaching staff – well above the 3 per cent pay rise ministers had budgeted for.
Chancellor Rachel Reeves must pay for the hefty wage bill – or face the prospect of more crippling strikes.
The National Education Union said they will stage walkouts unless ministers cough up.
The wage bill would cost a staggering £3.5 billion for schools and the NHS alone.
Paul Johnson, director of the Institute for Fiscal Studies, said the cost for the entire public sector is expected to hit a massive £10bn.
He said: “The answer is the same as the answer always is when asked: where can the money come from?
“It can only come from higher borrowing than they’re planning, higher taxes than they’re planning or cuts in spending elsewhere.
“There is no fourth option here.”
Daniel Kebede, general secretary of the National Education Union, said: “It would be highly problematic for the Treasury to then intervene and then not implement a 5.5 per cent pay award.
“We absolutely would want to avoid strike action, but that would almost seem inevitable if the Treasury were to make such an intervention.”
Pepe Di’Iasio, General Secretary of the Association of School and College Leaders, said: “We also need assurance that the government will fund this pay award as school budgets are already under immense pressure and cannot bear this additional cost.”
She is expected to deliver a gloomy statement to Parliament before summer blaming the Tories for the dire state of the books.
A Government spokesman said: “We value the vital contribution the almost 6 million public sector workers make to our country.
“The Pay Review process is ongoing, and no final decisions have been made.
“ We will update in due course; however we are under no illusions about the scale of the fiscal inheritance we face.”
Tory MP Alec Shelbrooke said: “We took the tough decisions to keep inflation under control.
“If Labour give in to their union paymasters, it’ll increase inflation again, making everyone suffer.”
Shadow Treasury Minister Laura Trott said: “Labour cannot pretend that things are worse than they thought, nor that they didn’t know what their economic inheritance was when they made promises during the election.
“We will keep them to these promises, particularly their pledge not to raise taxes on working people.”
