Rachel Reeves, the new Labour Chancellor, has signaled that public sector workers, including teachers and NHS staff, may receive above-inflation pay rises, following recommendations from independent pay review bodies. These bodies have proposed a 5.5% pay rise, significantly higher than the current 2% inflation rate, which could cost the government an additional £3 billion for schools and the NHS alone. Paul Johnson of the Institute for Fiscal Studies warned that accommodating these rises might require increased taxes, higher borrowing, or spending cuts. Reeves emphasized the necessity of these pay hikes to prevent further strikes and recruitment challenges but assured that any adjustments would be made responsibly. The decision, expected by the end of the month, will be a test of the Chancellor's commitment to her fiscal rules. This move follows a broader Labour plan to reform education and address public sector pay disparities.