Schools and the NHS face billions of pounds in cuts after the government ruled out extra borrowing to fund public sector pay rises.
Rishi Sunak will decide today whether to accept recommendations by independent advisers to give public-sector workers pay rises of about 6 per cent. He has warned that any pay rise must not fuel inflation amid concerns that Britain is in the grip of a wage-price spiral. Last month inflation defied expectations and remained at 8.7 per cent.
Jeremy Hunt, the chancellor, has ruled out borrowing to fund the pay rises, leaving all increases of more than 3.5 per cent to be funded by government departments. It means there will have to be cuts of £3 billion elsewhere.
