Millions of public sector workers could have their pay frozen as the Treasury looks to pay down the Covid debt next year, it has emerged.
The measure, which would only impact workers in England, has raised fears that Rishi Sunak is planning a wider return to austerity to pay for the pandemic.
The Chancellor is reportedly preparing to announce a limit on the pay of millions of council staff, civil servants, teachers, police and other public servants when he unveils his spending review next week.
Frontline NHS doctors and nurses are expected to be exempt from any cap in recognition of their work during the coronavirus crisis.
Unions reacted angrily to the prospect of a wage freeze after such a tumultuous year, with one saying industrial action could not be ruled out.
SNP Westminster leader Ian Blackford said the move would set “austerity alarm bells ringing in Scotland”.
He said: “A pay freeze would be a slap in the face for workers who have been on the frontline tackling the coronavirus crisis.
“These Tory cuts would threaten Scotland’s recovery – and come on top of the damage that is already being done by an extreme Brexit, which has taken more than £4 billion out of Scotland’s economy.
“It’s clear the Tories have learnt absolutely nothing from the last decade of Westminster cuts, which pushed millions of people into poverty, damaged public services, squeezed living standards, and held the UK economy back.
“There must be no return to Tory austerity. Instead the Chancellor must announce a fiscal stimulus of at least £80 billion to kickstart a green recovery, and a major funding increase for our NHS and public services, including a pay rise for workers who have given so much to tackle coronavirus.”
‘Pay freeze will worry people and slow down economy’
The Treasury said it did not comment on speculation, but said public sector pay restraint was mentioned by Mr Sunak in July when the spending review was launched.
Shadow Chancellor Anneliese Dodds called on Mr Sunak to urgently clarify the UK Government’s position, adding: “Freezing pay will leave people worried about making ends meet – that means they’ll cut back on spending and the economy will take longer to recover.”
Mr Sunak will set out his spending review next week, giving details of how much money will be allocated to different departments during the 2021-22 financial year.
He is expected to make the case for pay restraint to reflect a fall in private sector earnings this year.
The Chancellor’s review comes after UK Government borrowing hit £22.3bn in October.
Since the beginning of the financial year in April, government borrowing has reached £214.9bn, £169.1bn more than a year ago.