Philip Hammond hints that public sector pay cap could be scrapped in Autumn Budget

PHILIP HAMMOND gave his clearest hint yet that he will lift the public sector pay cap in his Autumn Budget.

The Chancellor said the “fact that the Cabinet has been discussing issue sends a clear signal” .

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In another signal he is set to scrap the 1 per cent pay cap he admitted that government bodies were struggling with recruitment and retention problems.

But he exposed the row engulfing the Cabinet by refusing to deny he told last week’s meeting that public sector workers are “overpaid” and backed up the reports by saying their “very generous” pensions put them 10 per cent ahead of their private sector counterparts.

The Cabinet is at war over whether to end the 1 per cent cap - with the likes of Boris Johnson and Michael Gove warning that a failure to loosen austerity will shed more votes to Labour.

But Mr Hammond has insisted the Government must keep balancing the books and said he is only willing to hike wages if the public a stomach tax rises to pay for it.

Asked whether it was true that he told Cabinet colleagues that public sector workers were “overpaid,” Mr Hammond said: “I’m not going to talk about what was or wasn’t said in a Cabinet meeting and it’s easy to quote a phrase out of context.”

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But he said the public sector pay cap was justified because it had “raced ahead” of private sector pay following the 2008 financial crash and had only just levelled out.

He added: “But when you take into account the very generous contributions that public sector employers have to pay in for their workers’ pensions, their very generous pensions, they are still about 10% ahead.

Hinting that an end to the 1 per cent restraint was coming, the Chancellor said: “I don’t for a moment deny that there are areas in the public service where recruitment and retention is becoming an issue.

“There are areas of the country where public sector wages and private sector ways are getting out of kilter in the other direction and we have to look at these things and we have to discuss them.

“But it’s important that we discuss them on the basis of the facts, not rhetoric from the Labour Party or the trades unions.”