Government will have to find big savings to fund pay rises for staff that have been settled through arbitration.

The bill for 2.3% increase for civil servants, government manual workers and Tynwald members comes to more than £2.6m.

And the cost for a 2.5% pay award for nurses and other healthcare workers, backdated to 2016-17, is a further £1.7m.

In his Budget speech, Treasury Minister Alfred Cannan said a 1% cap on the salary budget would remain in place and urged those charged with negotiating pay awards to be responsible.

He told iomtoday: ’The budget criteria was clear.

’We have allowed for a 1% increase and that means that government departments will have to find an additional £2.6m of savings from their allocated budgets.

’Clearly we will review and assess the impact when we meet with departments in the autumn to discuss their financial bids for next year.’

Meanwhile the Department of Health and Social Care, already battling to avoid another budget overspend, will have to make further savings to fund the pay award.

In a statement, it said: ’The department recognises the hard work being done by staff and wishes to place on record its appreciation for the efforts being made to continue to provide the Island’s population with top-class care.

’February’s Budget contained a commitment by Treasury to fund a 1% pay rise across the public sector, with anything in excess having to be found from within departmental budgets.

’Efficiency savings must be made in order to make up the remaining 1.5% agreed through arbitration and the DHSC is currently considering how this will be best achieved.’

The DHSC had to ask for £11.1m of extra funding for the last financial year and £9m the year before.

It has been given an extra £11m in the Budget this year but will have to find an equivalent amount in savings.

In a written reply to a Tynwald question this month, Health Minister Kate Beecroft indicated another supplementary vote may be necessary, admitting that expenditure remains ’higher than budgeted’ in the first quarter of this financial year 2017/18.

In a statement to Tynwald on financial sustainability, Mrs Beecroft said her department was facing a ’significant funding challenge’.

Additional measures had to be taken to meet the budget allocated and put the department on a sounder financial footing, she explained.

Mrs Beecroft outlined a series of measures being taken to reduce costs including reducing the reliance on agency staff and remodelling portering, house-keeping, switchboard and the management structure.