Teachers and police among those to reportedly benefit but no new funds available

This article is more than 1 year old

This article is more than 1 year old

Two million public sector workers including police officers and teachers are to receive above-inflation pay increases, the biggest for six years, the government is expected to announce.

Police officers will receive a 2.5% rise while the salaries of teachers and other school staff will increase by 2.75%.

Soldiers will get a 2.9% increase and dentists and consultants will get 2.5%, the Treasury is set to announce on Monday, according to the Times.

Most public sector workers’ pay increase will be higher than the 2% rate of inflation. Many have been forced to accept below-inflation pay increases during the government’s austerity drive of the past decade, while rents have risen by more than the cost of living.

The Treasury is expected to emphasise that, with the exception of some extra funding for schools, the rises will have to come from existing budgets at an estimated cost of £2bn. It is one of Theresa May’s final decisions as prime minister.

Public sector pay rises were capped at 1% after the Conservative-led coalition came to power in 2010, but the cap was scrapped last year.

The rises do not apply to other public sector staff, such as more junior civil servants and nurses, whose pay is dealt with separately.

Paul Johnson, the director of the Institute for Fiscal Studies thinktank, said the proposals were similar to pay rises implemented last year.

He told BBC Radio 4’s Today programme that many of the pay increases were “only just” above inflation – which is at 2% – and were still slower than average pay rises in the private sector.

It comes after a report warned that London and the southern regions of England are facing a shortage of teachers, nurses and police officers as rising rents make housing in large parts of the UK unaffordable for key public sector workers.

The study by the consultancy firm PricewaterhouseCoopers published earlier this month said there was an urgent need to increase the supply of homes. It found that the failure of public sector pay to keep pace with soaring housing costs had made it increasingly hard for workers on modest incomes to make ends meet.

PwC said the benchmark for an affordable rent was that it accounted for no more than 30% of an individual’s gross annual income, but that this threshold had been crossed in the high-rent hot spots in the more prosperous parts of Britain.

In London, workers in their 20s were spending more than half their incomes on rent, making it impossible for them to save up the deposit to buy a home.

Responding to the Times story, the shadow chancellor, John McDonnell, called for any pay rise to match overall wage growth and to be funded by new money, not from existing Whitehall departmental budgets.

He said: “With overall wage growth at 3.4%, it looks like Philip Hammond’s final act as chancellor will be this insulting pay offer set to push public sector workers further behind. After years of holding back the pay of our dedicated public sector workers, it is shameful for the government to pay for ending the public sector pay cap with more cuts.

“Labour will invest in our public services across the board, ending years of austerity and eliminating in-work poverty.”

Under the Treasury’s proposals, police officers at all levels will receive a salary increase from September.

The education secretary, Damian Hinds, secured a 2.75% increase for teachers across all pay ranges and allowances. The rises will still be based on individual performance.

The defence secretary, Penny Mordaunt, won a 2.5% rise for all members of the armed forces. The salary for the lowest-paid privates will go up from £19,025 to £20,000.