Calls for austerity rethink grow as May is told she can’t ‘keep calm and carry on’

After MPS warned Downing Street that public sector pay cap must end, PM’S most senior minister is set to call for change

Prime Minister Theresa May is under pressure to make a third U-turn in a week over the 1 per cent cap on public sector pay rises amid growing calls for the government to ease austerity measures following the general election.

Mrs May’s most senior minister will today warn Conservatives not to “keep calm and carry on” after their disastrous general election and instead “change hard” to win over young voters who backed Jeremy Corbyn’s Labour.

And a delegation of up to 20 Conservative MPS demanded a change in policy in meetings with the Downing Street chief of staff Gavin Barwell this week, it was claimed.

According to reports, they received guarantees that the Chancellor will provide relief for public sector workers who have seen their pay cut in real terms every year since the Conservatives came to power.

Damian Green will today tell Tories they must modern- ise after losing their House of Commons majority in an election in which they trailed anti-austerity Labour by 30 percentage points among voters aged 18 to 35.

He will address a conference in central London as thousands are expected to gather a mile away for a “Tories out” anti-austerity demonstration, which Mr Corbyn is due to address.

The First Secretary of State, who effectively acts as Deputy Prime Minister, will tell Conservatives to “listen to the complaints” of “excluded” voters and develop policies and a “distinctive” message that speaks to them, including a new “city Conservativism” to woo young metropolitan voters.

He will highlight existing Tory policies to build 1.5 million homes by 2022 and the devolution of power to cities.

Speaking at the gathering of the Bright Blue liberal conservative think-tank, Mr Green will say: “I first started writing pamphlets and making speeches saying the Conservative Party needed to modernise in the late 1990s, when we had 165 MPS. Now we have 317.

“I am not standing here and saying all we need to do is keep calm and carry on. We need to think hard, work hard and change hard. We need to show how Conservative values and policies can work for those parts of the country, and parts of the population, who have turned away from us.

“It is now clear that the root of our failure to win a majority last month lies in those aged 18 to 35, among whom Labour led the Conservatives by over 30 percentage points.

“Modernisation in 2017 involves, as ever, listening to the complaints of those who are being excluded and developing both individual policies and an overall message which speaks to them. A country that works for everyone is Theresa May’s ambition, and it is exactly what we need to aim for, as successful Conservative leaders have in the past.

“If we are to bring young, educated, working Britain back to the Conservative Party, we need to make a reality of the promise to build a country that works for everyone.”

On Thursday, Mrs May’s minority government saw off a Labour amendment to the Queen’s Speech that demanded an end to public sector pay restraint.

Under George Osborne as chancellor, public sector pay was frozen for two years, before a cap was imposed that has been continued by Philip Hammond.

The measure was not due to be reviewed for another two years, but there were mixed signals from the government on whether it was willing to change its approach after failing to secure a majority at the general election.

Ministers hinted the cap could be reviewed and a senior Number 10 source briefed reporters that Mrs May accepted voters were “weary” of austerity and was ready to listen to recommendations from the independent bodies that review public sector pay – only for Downing Street to officially stress that the policy has not changed.

The 360-degree turn led to accusations of a “shambles” from shadow chancellor John Mcdonnell.

Grant Shapps, one of the MPS who was reported to have met Mr Barwell on Wednesday, said that government should “learn the right lessons from this election”. He said: “We lost because we offered people a long list of punishments rather than hope and failed to fight for better livelihoods for everyone from the hospital nurse to the aspirational small business owner.”

Another Tory MP, Johnny Mercer, said he would be “a loud voice to remove the public sector pay cap for frontline workers” despite opposing Labour’s amendment – and said he would campaign to have the issue addressed when the Chancellor delivers the Budget this autumn.

Meanwhile, a former Tory minister called on Mrs May to raid the foreign aid budget to fund a pay rise for the worstoff public sector workers.

Robert Halfon, who was sacked from his frontbench education role by Mrs May after the election, said the 1 per cent cap should be scrapped for lower-paid public employees. He called for the “sacred cow” of the aid budget to be sacrificed, reversing a commitment to meet the 0.7 per cent foreign aid target set by the UN and put into law by David Cameron.

“I am not standing here and saying all we need to do is keep calm and carry on. We need to think hard, work hard and change hard”