Brown is tempting pay revolt, say unions

BRITAIN'S biggest civil service union yesterday warned the Chancellor of the Exchequer was heading for an "explosion" among public sector workers if he insisted on keeping his tight grip on state spending.

Reacting to Gordon Brown's confirmation to a TUC delegation yesterday that he was determined to clock up budget surpluses until the next election, Barry Reamsbottom, joint general secretary of the Public and Commercial Services Union (PCS), said that employees' leaders could not "hold the line" indefinitely.

He said there had been a freeze on civil service pay bill for six years and that there were signs of increasing frustration among his members. Recent figures showed that more than 15,000 employees left the civil service over the past year, the highest number since 1991. "That is a warning of trouble to come," said Mr Reamsbottom.

Rodney Bickerstaffe, leader of public service union Unison, who was part of the TUC delegation, said it was "totally unnecessary" to prolong financial stringency.

After an hour-long meeting with the Chancellor, John Monks, TUC general secretary, said that there was no contradiction between Mr Brown's stringent policy and a 3 per cent increase in expenditure on health, education and public transport. "We put our case for increased public expenditure in line with rises in national prosperity," said Mr Monks.

The TUC believes that some Treasury "hawks" want to see the percentage of gross domestic product spent on public services reduced to levels currently seen in the United States.

Even before meeting the TUC, the Chancellor brushed aside union demands for the surplus money to be spent on higher investment in public services, although he left room to target big increases in spending on education and health.

It will mean tightening the screws on other spending departments, including social security and defence, before the Cabinet agrees the comprehensive spending review next month.

Mr Brown has refused to accept the pounds 500m cut offered by the Secretary of State for Defence, George Robertson, in the pounds 22bn defence budget. The Chancellor has ordered his own team to look for deeper cuts.

Promising that for the rest of this Parliament the Government would borrow only to invest, he assured the City that current spending would be more than covered by tax revenues.

Addressing a conference in London, the Chancellor injected more iron into his reputation by announcing plans for a three-year surplus of tax revenues over the great bulk of public sector expenditure. "Those who said that we would fail to show the necessary discipline in public spending have been proved wrong," he said.

The announcement extends and toughens Mr Brown's pledge to abide by the "golden rule" - that over the course of a business cycle the Government should borrow only to finance investment. This means current spending has to be met from current tax revenues throughout the remaining years of the Parliament.

As the economy is slowing, it is likely to reduce the growth in tax revenues and increase spending pressures. "Whatever the pressures or difficulties, we will not be diverted from these tough rules," Mr Brown said.

The Liberal Democrats pounced on the speech as evidence of "fiscal flagellation". Treasury spokesman Edward Davey said: "Given Labour's current problems in delivering on their promises on public services, it is astonishing that Gordon Brown is taking such a restrictive approach - putting the piling up of surplus cash before improvements in health and education."

However, Francis Maude, the new shadow Chancellor, predicted Mr Brown would not be able to stick to his tough promises because of pressures on public sector pay. "Let's see whether he's got the mettle to stick through it," he said.

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