May defends austerity as she faces calls to keep purse strings tight

THERESA MAY must not abandon austerity, a campaign group has warned, as research shows public spending has fallen by just 0.2 per cent in the past seven years.

John O’connell, the chief executive of the Taxpayer’s Alliance, warned ministers must be “prudent” rather than “turning on the taps” – or face “terrifying” economic consequences.

Writing in The Daily Telegraph, he said: “It’s crucial that we heed the Chancellor’s words and have a sensible debate about spending priorities.”

The Prime Minister mounted her own fightback over austerity amid a growing Cabinet row, telling MPS that backtracking on plans to cut the deficit would leave the UK in a similar position to Greece, where public spending has been slashed.

Mrs May said nurses and other NHS staff had already received more generous pay rises than the one per cent cap because of incremental increases over the past seven years.

The intervention was the first time Mrs May has spoken publicly about austerity since the rift was exposed at the weekend, when Cabinet colleagues demanded a re-think on pay restraint.

Boris Johnson and Michael Gove, the Foreign and Environment Secretaries, and others called publicly for the public-sector pay cap, which limits raises to 1 per cent, to be lifted in order to retain staff and boost morale.

On Monday, Mrs May’s predecessor, David Cameron, also waded into the row, saying that seeking to control the public finances was not “selfish”, unlike spending money that the Government did not have. Speaking in the House of Commons yesterday, the Prime Minister pledged to stick to the Government’s plan to cut the deficit and ensure the country lived within its means.

She said: “This is not a theoretical issue. Let us look at those countries that

failed to deal with [the deficit]. In Greece, where they have not dealt with the deficit, what did we see with that failure to deal with the deficit?

“Spending on the health service cut by 36 per cent. That does not help nurses or patients”.

She added: “It is not fair to refuse to take tough decisions and to load debts on to our children and grandchildren; it is not fair to bankrupt our economy, because that leads to people losing their jobs and their homes; and it is not fair to go out and tell people that they can have all the public spending they want without paying for it”.

One Cabinet minister said the Government could limit significant pay rises to the lowest earners rather than lifting the overall cap.

“It’s important we stick to our guns on this,” the minister said. “We have to be fiscally responsible.”

The Prime Minister also claimed yesterday that many public sector workers have had a larger than one per cent pay increase because of incremental pay rises which occur on a yearly basis.

She said: “People may not realise that there is not only the overall publicsector pay increase but, for many nurses, increments or progression pay as well.

“A typical band-five nurse will receive 3.8 per cent over and above the one per cent.”

Philip Hammond, the Chancellor, will announce any changes to public sector pay in his autumn Budget.

He has indicated that money would have to be raised in order to pay for extra spending.

Before the Prime Minister’s intervention yesterday, Steve Baker, the Brexit minister, called on his colleagues to stop arguing in public and instead agree on the party’s position behind closed doors.

His call was echoed by Kenneth Clarke, the former chancellor, who added that removing the public sector pay cap would be an “economic disaster” for the UK.

He said: “If [ministers] were to give way to this week’s lobbying on this subject, it would be a political disaster because the Government would be accused of a U-turn and a surrender and it would set off a wave of pay claims across the entire public sector, which the Opposition are obviously looking forward to taking part in, if they can provoke them.

“It would also possibly be an economic disaster and not in the interests of the many people in the public and private sector who are having economic difficulties in these times and want to look forward to a much more prosperous future as we get our economy back into health again.”