A MAJOR pay rise for public-sector workers would have a marginal effect on inflation, economic experts have said.

The findings fly in the face of the Tory government’s claims that wage restraint is needed to help the economy.

Analysis by the Institute for Public Policy Research (IPPR) said a 10.5 per cent salary boost for public-sector staff would add a maximum of just 0.14 percentage points to inflation if funded by borrowing.

Raising salaries by this much would restore wages to the level they were in March 2020 and would have no impact on price rises if funded by taxation, it said.

The think tank added such a move is the only way to end all strikes, better recruit and retain key workers, and would also help hard-pressed employees struggling with the cost of living.

Report author and IPPR researcher Joseph Evans said: “It’s wrong to claim that giving the public sector a more meaningful pay rise will further embed inflation.

“Research shows that there is very little inflationary impact from a significant pay rise, but that the need to stop the fall in living standards for public-sector workers is urgent.

“Without an inflation-matching pay rise the public sector will continue to face a triple crisis of falling living standards, a recruitment emergency and declining quality of public services.”

IPPR senior economist and report author Carsten Jung said: “The government’s claim that by protecting public-sector pay we would hugely increase inflation is a red herring.

“The analysis which the government itself cites shows that restoring real pay to pre-pandemic levels would have only a marginal impact on inflation.

“Addressing the workforce crisis in the public sector requires restoring decent pay.

“This will require funding it through higher and fairer taxation — which the government is shying away from.”

Last week government departments were told to fund at least 6 per cent pay rise for millions of public-sector workers from within existing budgets after Prime Minister Rishi Sunak accepted all the recommendations of the independent pay review bodies.

Treasury minister John Glen said it was “not fair or affordable” to give pay awards stretching into the double digits, stressing the pay awards were “responsible.”

Chancellor Jeremy Hunt added that the government would take “difficult but responsible” decisions on public-sector pay to tackle inflation.

But the IPPR said yesterday that public-sector workers would still be £1,400 worse off this year than they were when the pandemic began with the 6 per cent boost, and urged politicians to commit to raising public-sector pay faster than inflation every year for the next five years.

Economists at the centre-left think tank said it would cost an additional £7.2 billion on top of the money Mr Sunak allocated to public-sector pay pots when he announced the pay rise.

They listed options for raising extra revenue include a wealth tax, reintroducing the National Insurance rise and equalising rates on capital gains and income from work, among others.

GMB national secretary Rachel Harrison welcomed the IPPR’s findings.

She told the Morning Star: “The claim higher public-sector pay settlements will lead to higher inflation does not stand up to scrutiny.

“Holding down public-sector pay does nothing to remedy for high inflation, but it does mean that 5.8 million workers are spending less in their communities.

“IPPR analysis for GMB found that for every pound spent on public-sector pay, more than 40p is returned to the Treasury in wages tax and lower social security payments.

“GMB is committed to campaigning for fully funded and restorative pay increases across all public services.”

The government has commited to give teachers a 6.5 pay rise, junior doctors will get a 6 per cent uplift and police officers across all ranks will get 7 per cent more.

Some of the money will come from increasing charges migrants pay to use the NHS and increasing the costs of certain visas, while the rest will come from departmental budgets.