Keir Starmer has refused to say whether a Labour government would give public sector workers a pay rise even if it is recommended by an independent pay body.
It comes after Prime Minister Rishi Sunak warned he will not shy away from making decisions “people may not like” to control inflation.
He repeatedly refused to commit to accepting pay body recommendations to increase the wages of workers such as nurses and teachers.
Labour leader Starmer said he recognises that workers are going through a “real squeeze” during the cost-of-living crisis when he was asked what he would do.
Consumer Prices Index (CPI) inflation remained at 8.7 per cent in May despite experts forecasting it would fall.
The CPI measures the monthly price change for consumers in the UK.
Starmer said Labour would have to “go at pace” to “repair and rebuild” the country’s finances but stressed that shadow chancellor Rachel Reeves’ “strong fiscal rules” could not be broken when paying for public sector improvements.
Reeves has set the fiscal rule that debt must be falling as a share of national income after five years of a Labour government.
Starmer told the New Statesman’s Politics Live Conference: “The first thing about public sector pay is we need to understand why people want their wages to go up because, for most people, their wages haven’t gone up in material terms for 13 years.
“And if your wages haven’t gone up in material terms but every bill has gone up, there is a real squeeze on.
“The failure to grow the economy and the additional damage that Liz Truss did is the cause of that.
“But I’m not going to hide from this. If we are privileged enough to come into power at the next election … we’re going to inherit a real mess – a very badly damaged economy, public services that aren’t on their knees but are on their face, the NHS in particular.
“And a sense that we’ve got to go at pace to try and repair and rebuild, and run towards the future which is available for us as a country.
“And Rachel’s been clear that that will require us to have strong fiscal rules which we’re not going to break. But we urgently need to get on with the task now of picking the country up, rebuilding and moving forwards.”
Starmer accused Sunak of being “out of touch” over his recent comments about the pressure stubborn inflation and rising interest rates is putting on the public.
He said: “Some of the language he has used in the last week has been extraordinary: ‘I’m on it’, ‘Hold your nerve’, or recently telling the country to ‘understand the economic context’,” Sir Keir told a central London audience on Tuesday.
“The idea that people who are struggling every day do not understand the economic context they are in is, frankly, real evidence of how out of touch he is.”
SNP Westminster Deputy Leader Mhairi Black said: "Public sector workers are being completely abandoned by the Westminster parties - demonstrating exactly why Scotland needs independence.
“Tory cuts, Brexit and economic incompetence have left public sector workers paying an unacceptable price for Westminster rule. The fact that Sunak and Starmer are both refusing to increase their pay shows they are two sides of the same coin.
"The SNP is the only party offering real change with independence, real help with the cost of living, and real opposition to Tory cuts. It's clear the pro-Brexit Labour Party is too busy copying damaging Tory policies to stand up to the UK government.
"The SNP will press the UK government to accept the independent pay recommendations, at minimum - but only by voting SNP at the next election can Scotland protect public sector workers and get rid of unelected Tory governments for good with independence."
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