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3 July 2017

Would easing the public sector pay cap be the start of a slippery slope for the Treasury?

The Chancellor could find himself continually doling out extra cash to head off rebellions.

By Stephen Bush

To defeat Jeremy Corbyn, you must become him. That appears to be the conclusion that the Cabinet has reached over the weekend. Damian Green used his address to the Conservative think tank Bright Blue to call for  “a national debate” over the future of tuition fees. (However, aides have clarified the remarks, saying that Corbyn got away with promising to cut fees without really having to defend his planned tax increases, and that is the “debate” that must be had.)

The Conservatives are taking something of a Corbynite turn, however: Michael Gove told the Sunday Times‘ Tim Shipman that the public sector pay cap should be lifted. Boris Johnson has stuck his oar in too, saying that he supports a lifting of the cap, provided it is done in a “responsible way”.

Cabinet split over austerity tax row” is the Telegraph‘s splash. Except the Cabinet isn’t split, not really. A list of ministers who are for continuing the pay freeze would start with “Philip” and end with “Hammond”.

Also pressing the case for more cash is Justine Greening, who wants £1.2bn in extra funding for schools in order to cancel the coming cuts to education.

It’s difficult for the Treasury – on the one hand, Theresa May’s disappointing election result means that their nightmare of being hobbled by Downing Street has been headed off at the pass. On the other hand, panic at the near-death experience of the election means that everyone wants a little extra cash. (That these sums are so easily packaged as “the DUP plus a spare Nigel Dodds” by the opposition is only going to add to the clamour for more spending.)

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There’s also the risk that, in these times of no majority, the Treasury finds itself continually doling out extra cash to head off rebellions. A little extra money to allow Northern Irish women to access their reproductive rights here. Easing of the pay cap there. These aren’t big sums as far as the government’s total expenditure goes, but they all make the Budget harder and make it less and less likely that Hammond’s scrapping of the Autumn Statement will last very long.

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The danger for the Conservatives is that if they endure a summer of discontent from public sector workers and continuing pressure on pay thanks to the cap, as well as the fall in the value of the pound, then that doesn’t exactly communicate that they have “got the message” and only helps Labour. But if the Chancellor is seen to have lost control of public spending, that hurts the Conservative brand, too.