Burning Issue: With inflation at 4.4%,is pay restraint neededto keep a lid on prices?

Published on Tuesday 12 August 2008 22:08

Yes ALISTAIR DARLING Chancellor of the Exchequer

TODAY'S inflation must be tackled. We cannot be complacent. But in comparison to the 1970s, when it reached over 26 per cent, it remains low. Even in 1991, it was still at 8 per cent.

Eleven years ago, we made the Bank of England independent. The Monetary Policy Committee has been a cornerstone of the successful economic policy frameworks that have delivered sustained growth and a level of inflation that has been, on average, lower than in the euro area and United States. But while the inflationary pressures we faced in the past were primarily domestic, today they are global. In the last year world agricultural prices have increased by 40 per cent. These are external shocks that affect every economy in the world.

Because of the UK's flexible labour markets, employment is at record levels, unemployment is low and half the level it was in the early Nineties. And pay growth has remained moderate. Average earnings growth, excluding bonuses, in the year to April was 3.9 per cent, a little below its average since May 1997.

But continued restraint on pay is required from both the public and private sector. We must recognise the need to reward efforts of people who work hard.

But to return now to inflationary pay settlements would undermine rather than raise people's living standards with a damaging circle of wage increases eroded by steadily rising prices.

We must never return to those days.

That is why the government has agreed a number of multi-year pay deals that now cover 1.5 million public sector employees.

No

DAVE PRENTIS

Unison general secretary

OFFICIAL figures out yesterday reveal the government's preferred CPI measure of inflation jumped from 3.8 per cent in June to 4.4 per cent in July.

It is the biggest monthly change since records began in 1997, with the new figure now more than twice the government's official 2 per cent target, which this year's public service pay offers were based on.

This rise just confirms what our members have been telling us for months – they are facing unparalleled hikes in the cost of basics like milk, bread, cheese, petrol, gas and electricity.

The government's unjust public sector pay policy means that teaching assistants, nurses, librarians, care workers, home carers, nursery staff and hospital cleaners are having to cope with the biggest rise in inflation since current records began, on a real-pay cut.

Instead of targeting the public sector workers who keep this country running, the government should turn its firepower on to the big city bonuses and corporate fat cats who are the real villains when it comes to fuelling inflation.

Unison members working in local government in Scotland are gearing up to a 24-hour walkout over pay next week. They will be taking action alongside their colleagues in GMB and Unite over a 2.5 per cent pay offer, for three years, with no re-opener clause.

This pay offer will force many people to compromise on the basics of life. This has left local government staff with little choice but to take strike action. We are always willing to negotiate with the employers and are urging them to get back into talks with us to avoid disruptive strike action.