- Chancellor Philip Hammond says that the Britain needs a "grown-up debate" on whether public sector pay should be increased.
- Hammond says that the government needs to "hold its nerve" on austerity and continue the "right balance."
- Fellow Conservative cabinet ministers like Boris Johnson have publicly called for the 1% cap on public sector pay rises to be axed.
- Former minister says that Johnson should resign from cabinet if they feel cannot support continued austerity.
LONDON — Chancellor Philip Hammond has said that Britain needs a "grown-up" debate over whether pay for public sector workers should be increased, arguing that the government must "hold its nerve" on austerity.
Hammond, who has faced calls from fellow cabinet ministers to scrap the 1% freeze on public sector pay increases, said that the government must continue the "right balance" between what is fair for workers and taxpayers.
Prime Minister Theresa May and Hammond have both faced increasing pressure from senior Tories to ease austerity.
Ministers have urged Hammond to scrap planned tax cuts in order to fund an increase in public sector pay, according to the Times. The chancellor has been urged by a number of senior Tories to delay plans to cut corporation tax and raise the thresholds for personal allowance and the 40% income tax rate, the Times report claims.
However, in a speech to the CBI on Monday night, Hammond said that "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, he added. "But instead we must hold our nerve... and maintain our focus resolutely on the prizes that are so nearly within reach."
This contrasts with cabinet members such as Foreign Secretary Boris Johnson and Environment Secretary Michael Gove, who over the last week have suggested that the public sector pay cap ought to be axed following the shock general election result where the Conservatives lost their parliamentary majority.
A source close to Johnson said: "He supports the idea of public-sector workers getting a better pay deal and believes the findings of the pay review bodies should be respected."
Gove told the BBC's Andrew Marr Show that the government "should listen to the pay review bodies who govern each individual area of public sector pay," and that ministers should respect the "integrity" of the pay review process.
A cabinet divided
A minister who is an ally of Hammond told the Daily Telegraph that the interventions of Johnson and others were "not eloquent or clever," adding: "We have to be honest with the public. Economic credibility matters for the future of this party. How are we going to fund it? We need to have a national debate about this.
"I despair of them. How can you criticise the Labour Party for borrowing too much if you're going to do the same."
On Monday the former work and pensions secretary Stephen Crabb said that cabinet ministers like Johnson should resign from the cabinet if they are unable to support government policy.
Speaking on the BBC's World At One, Crabb said: "If they want to take a position that is different from that of the official government line, then they should not be in the cabinet.
"I do think that if you are in the cabinet, if you are taking the government’s shilling, then you need to stick rigidly to the government line."
The BBC's Laura Kuenssberg reported a clear split among May's most senior colleagues over whether the Conservative government should reverse its position on public sector pay increases.
On Monday former chancellor Norman Lamont defended Hammond's stance, saying on BBC Radio 4's Today programme that "it is unavoidable that we have restraint on public spending," adding: "it is not right for cabinet ministers to gang up on the chancellor in this way. It is making his position very, very awkward indeed."
Hammond told the CBI that increasing public spending without an increase in taxations is "merely passing the bill to the next generation."
The chancellor recognised that seven years of austerity had left the British public feeling "weary" but said increasing tax to pump more money into the public sector was not the answer.
"That does not mean we can't have a debate in Britain about the level of funding of public services," he said.
"But it does mean that it has to be a grown-up debate where we acknowledge that borrowing to fund consumption is merely passing the bill to the next generation and reject the fallacy that the burden of additional taxation can always fall on someone else."
The cap was introduced by former prime minister David Cameron in 2010 and has resulted in public sector pay being frozen at one percent rises for the last seven years. May and her chancellor Philip Hammond have both insisted that the cap will remain until at least 2019, but increasingly Conservative MPs have spoken out against the measure.
Former Labour chancellor Alastair Darling told the Today programme on Tuesday morning that he thought Hammond should announce a spending review on public sector pay, and that the government looks "pretty shambolic," with ministers arguing in public adding that "it is no way to run a government."