A Scottish Government source confirmed that pay settlements for NHS staff, civil servants and other public sector employees will “take account of the cost of living” in future after years of being outstripped by inflation.
The flagship measure in this week’s programme for government announcement will lead a “bold” package of reforms across areas including the environment and housing.
The source told a Sunday newspaper: “The Programme for Government will make clear that the time has come to ditch the one per cent pay cap for the public sector. The cap will go from next year and future pay policy will take account of the cost of living. We need to ensure that future pay rises are affordable, but we also need to reflect the circumstances people are facing, and recognise the contribution made by workers across the public sector.”
A Labour bid at Holyrood to scrap pay restraint for NHS Scotland staff was defeated, but Finance Secretary Derek Mackay later announced a rethink.
During the general election, Nicola Sturgeon also signalled that the cap would be reviewed after being challenged by an NHS nurse in a television debate.
It comes as the UK Government comes under growing pressure from Jeremy Corbyn’s Labour party to ease pay restraint for public sector workers. Theresa May’s cabinet is split on the issue, with several members calling on Chancellor Philip Hammond to scrap the Treasury’s pay cap which has been in place since 2013, preceded by a two-year freeze.
The Scottish Government said it would be the First Minister’s “most ambitious” programme yet, with 16 bills to be added to the 11 currently in progress.
Ahead of the announcement, Ms Sturgeon said: “This programme for government is our plan to shape the kind of Scotland we all seek - an inclusive, fair, prosperous, innovative country, ready and willing to embrace the future. It includes major reforms in education, health and justice, new opportunities for our communities and important measures to safeguard the environment and improve the quality of housing.
“Crucially, this programme for government also sets out a bold and forward-looking economic vision - sending a clear message to our people, businesses, schools, colleges and universities, and to the wider world: Scotland’s ambition is to be the inventor and the producer, not just a consumer, of the innovations that will shape the lives of our children and grandchildren.”
Interim Scottish Labour leader Alex Rowley MSP said: “This SNP U-turn is long overdue - and it is welcome to see that Derek Mackay has finally followed Labour’s lead to end the pay cap.
“The SNP voted down a Labour motion to end the pay cap for our hard-working nurses earlier this year.
“This SNP’s change of heart should be followed by a commitment to go further and use the powers of the Scottish Parliament to end austerity and invest in public services.”