LONDON (AFP) - British Prime Minister Theresa May's government signalled an easing of austerity on Wednesday (June 28) following a disastrous election result, indicating it would review a long-standing cap on wages for public sector workers.
The shift came as Mrs May's Conservatives faced their first parliamentary test since losing their majority in the June 8 vote, as the opposition Labour party sought a House of Commons vote on the seven-year spending squeeze.
"We are going to listen to the message that was sent in the election. We understand people are weary after years of hard work to rebuild the economy," a senior source in Mrs May's Downing Street office said.
"We're working through and looking at the recommendations from the pay review bodies that are coming in."
The Conservatives had expected to increase their majority in the election, but left-wing Labour leader Jeremy Corbyn energised voters with an offer of increased public sector investment.
The Downing Street source said no decisions would be taken until the budget later this year, adding: "It's vitally important that we balance the books and live within our means."
Around five million workers employed in local authorities, schools, hospitals and job centres have seen their wages fall in real terms following two years of a pay freeze and four years with salaries capped at a below-inflation one per cent.
Labour tabled an amendment on Wednesday to the Queen's Speech - the government's legislative agenda - calling for an end to the pay cap and cuts to the police and fire service budgets.
Ahead of the vote, expected at around 1800 GMT, Mr Corbyn claimed austerity played a part in the blaze at the 24-storey Grenfell Tower in London earlier this month, in which 79 people are presumed dead.
The external cladding is thought to have fuelled the flames, and tests on 120 similarly-tiled high-rises have all failed fire safety tests.
In a Commons debate with Mrs May, Mr Corbyn highlighted budget cuts to fire services and local authorities, which are responsible for inspecting buildings.
"What the Grenfell Tower tragedy has exposed is the disastrous effect of austerity," he said.
The annual British Social Attitudes survey, published on Wednesday by the National Centre for Social Research, suggests attitudes towards austerity are shifting.
The survey of almost 3,000 people found 48 per cent want higher taxes to finance more public spending - the highest level in more than a decade.
A senior Labour source said the government's shift on public sector pay was "very encouraging" and urged Conservative MPs to back its amendment.
Mrs May should have just enough numbers to vote the amendment down, after striking a deal to stay in office with a small Northern Irish party.
That deal has itself raised questions about austerity, after the government promised £1 billion (S$1.79 billion) in new funding for the province to secure the Democratic Unionist Party's support.
The Conservatives have 317 of the 650 seats in Parliament and would be supported by the DUP's 10 MPs.
But Labour wants to force the government to publicly defend public spending cuts, with an eye on the prospect of another election if Mrs May cannot hold on.
The prime minister called the snap June 8 election to strengthen her hand going into Brexit negotiations, but lost her majority, and with it, much of her authority.