The cuts from 2010 are no longer politically viable

Receive free UK business & economy updates

We’ll send you a myFT Daily Digest email rounding up the latest UK business & economy news every morning.

Good morning. Rishi Sunak has offered to increase public sector pay by five to seven per cent in a bid to end the rolling industrial disputes, and it will be funded by cuts to departmental budgets.

The chances of the former happening are very high. The chances of the latter happening are vanishingly small. Some thoughts on all that below.

School strikes are (probably) out

Yesterday Rishi Sunak accepted in full the recommendations of independent pay review bodies, in the hope that this will be enough to end the wave of strikes in England.

In good news for the prime minister, the announcement comes alongside one from the teaching unions that they will recommend their members vote to accept the offer. The better news is, even should some trade unions opt not to accept the deal, I think it is highly likely that a large enough minority will back them to make future strikes impossible. We’ve already seen that dynamic play itself out with the nurses’ strike: Unison voted to accept a similar pay rise, while the Royal College of Nursing rejected the offer. But the RCN then failed to hit the turnout threshold requirement for further strikes.

My sense is that is where most of these industrial disputes will land: some unions will accept the deal in theory and in practice, while some will end up accepting it in practice but not in theory.

Here’s another prediction: Rishi Sunak’s plan to fund these pay rises through existing departmental budgets will fail. The Treasury said a further £1.4bn would be raised over two years by increasing visa fees for migrant workers and putting up their annual NHS “surcharge” by 66 per cent to £1,035.

To deliver these pay rises without increasing taxes or borrowing will mean further cuts elsewhere. This is as good an opportunity as any to bring back my favourite chart:

The UK has already had a prolonged period of spending cuts, and by 2016 we had reached the point where further reductions became politically impossible.

Everything that has happened in British politics since then was in some ways driven by that: it is part of why Jeremy Corbyn made gains in the 2017 election, it’s why Boris Johnson’s 2019 campaign promised more money for schools, hospitals and the police, it’s why Sajid Javid resigned from Johnson’s government in 2020 and Rishi Sunak became chancellor, it’s why Sunak raised taxes in 2021, it’s why Sunak resigned from Boris Johnson’s government, it’s why Liz Truss became Conservative leader, it’s why Truss delivered tax cuts but no spending reductions, it’s why Jeremy Hunt became chancellor, it’s why Truss resigned as prime minister, it’s why Sunak is prime minister now.

There are not going to be £2bn in savings from existing departmental budgets this year or £3bn in subsequent years. It ain’t gonna happen! The only question is whether the inevitable tax rises are delivered by Jeremy Hunt or Rachel Reeves.

Now try this

Georgina and I went to Rambutan recently, in large part thanks to Tim Hayward’s excellent review of its Sri Lankan diaspora cooking. (Reading one of his reviews really is one of life’s great pleasures: I’ve had meals I found less appetising than some of them.)

We are fast coming up on the summer parliamentary recess, when this email will either a) be taken up by some kind of political crisis that we don’t expect or more likely b) take on a more discursive flavour, considering political books, trends and hypotheticals. If you have any thoughts on what you’d like us to tackle in the column, let me know by emailing us at insidepolitics@ft.com.

However you spend it, have a wonderful weekend!

Top stories today

• Hold the phone | The contents of Boris Johnson’s old mobile phone may about to be handed over to the Covid-19 public inquiry, amid signs the mystery over the former premier’s pin number has been resolved.

• UK ‘vulnerable’ over public debt | UK public finances are in a “very risky” position, with government debt on course to hit 310 per cent of gross domestic product in 50 years, the Office for Budget Responsibility has warned. The OBR also noted the UK had the highest proportion of inflation-linked debt of any major advanced economy, which has pushed up debt servicing costs.

• West country dispatch | Ed Davey hopes that next week the Liberal Democrats will overturn a 19,213 Tory majority in the Somerset seat of Somerton and Frome. Bookmakers give the Lib Dems a 96 per cent probability of victory. Anna Gross reports on the party’s strategy and residents’ concerns in the region that voted strongly for Brexit.

• China crisis | The government’s response to China’s “increasingly sophisticated” spying operation targeting the UK and its interests has been “completely inadequate”, according to a scathing parliamentary report.

• Northern Ireland NHS facing ‘severe challenges’ | Stormont’s Department of Health has said there is no money for health service staff in Northern Ireland to get pay rises, the BBC reports. The comments were made in a submission to an independent pay review body, which said that as a result pay in Northern Ireland may fall behind other parts of the UK.