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UK to raise health workers' pay by 6.5 pct over three years

LONDON, March 21 (Reuters) - More than a million British nurses and hospital staff should receive a pay rise of at least 6.5 percent over the next three years, their employers said on Wednesday, after the government eased a seven-year squeeze on pay.

Britain's government has limited pay rises for almost all public-sector staff to 1 percent a year for the past five years - well below the rate of inflation - after a previous two-year pay freeze.

Britain's state-funded and largely state-run National Health Service has said it is finding it harder to retain staff, and late last year finance minister Philip Hammond said he was lifting the public-sector pay cap.

Last week, in a budget statement before the start of the new financial year, Hammond confirmed he would fund an increase in NHS pay, if employers and unions reached an agreement.

Wednesday's deal covers nurses, midwives and hospital porters, cleaners and caterers - but not doctors or senior managers, whose pay is set separately.

The lowest-paid and most junior staff will see pay rises of up to 29 percent, due to increased starting salaries.

"It won't solve every problem in the NHS, but (will) go a long way towards making dedicated health staff feel more valued," said Sara Gorton, the lead pay negotiator for trade unions representing NHS staff.

Gorton's trade union, UNISON, is recommending the deal to members but it needs to be voted on before taking effect.

Health minister Jeremy Hunt said the deal "cements this government's commitment to protecting services for NHS patients whilst also recognising the work of NHS staff".

The pay rises will take effect in the financial year starting next month and will put upward pressure on wages at a time when the Bank of England has identified faster wage growth as an important pre-condition for it to raise interest rates this year.

Official data earlier on Wednesday showed that wages are growing at their fastest rates since 2015, with average pay in the three months to January up 2.8 percent on a year earlier.

The BoE's chief economist, Andy Haldane, said he expected this rate to reach 3 percent for the first three months of 2019.

British pay has stagnated in inflation-adjusted terms since the financial crisis, and staff receiving the 6.5 percent pay rise will see little real-terms rise in pay over the next three years.

Consumer price inflation hit its highest in more than five years in November, at 3.1 percent, and last week the government forecast prices would rise by almost 6 percent by mid 2021. (Additional reporting by Elizabeth Piper, editing by Andy Bruce)