Will teachers and NHS staff accept a large real pay cut?
The reports of the public sector pay review bodies are arriving across Whitehall right now, with the potential to become both economic and political dynamite.
In private, senior Cabinet ministers go further, saying that matching wages to inflation would be dangerous and damaging - even suggesting such a thing is irresponsible. There are two counter arguments here Firstly, those payments, which cover almost all the cost for several million households, are currently a one-off. Second, public sector pay has fallen overall since 2010 already, and there are some recruitment challenges already affecting some provision of services.
Then there is the more general argument about a 1970s-style wage-price spiral emerging. Certainly the last time inflation reached double digits in the 1970s when inflation topped over 20%, and in some years wage inflation was 30%. Union membership has fallen from 13 million at the 1970s peak to six million now. While the Government privately accepts that the numbers affected are small in relation to the whole economy, there is a "signalling effect", they argue, from high profile public disputes.
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