Cost-of-living crisis: Boris Johnson warns of ‘wage-price spiral’ as Scotland boost uncertain

Boris Johnson warned of a 1970s-style “wage-price spiral” if pay packets increase in line with soaring prices as he set out an extension of the right to buy scheme for housing association tenants in England.

The Prime Minister also announced a “benefits to bricks” scheme to allow welfare payments to secure mortgages as he sought to get his embattled premiership back on track.

Mr Johnson pledged a review of the mortgage market under plans to help renters onto the property ladder after surviving a bruising Tory revolt against his leadership.

The Right to Buy scheme is being extended in England, but doesn’t apply in Scotland.

Boris Johnson, centre, meeting student Cassidy, left, at Blackpool and The Fylde College. Picture: Peter Byrne/Pool via AP

It was still unclear last night on whether the Scottish Government would receive consequentials under the announcement.

As housing policy is devolved, some of the review’s recommendations will apply to the whole of the UK, but others may only apply to England.

Mr Johnson suggested in a major speech in Blackpool there should be restraint on wage rises on the day the cost of a full tank of petrol for a family car exceeded £100 for the first time.

Calling for caution in the face of rapidly rising inflation, Mr Johnson warned the Government would “fan the flames of further price increases” if it tried to spend its way out of the cost-of-living crisis.

“We can’t fix the increase in the cost of living just by increasing wages to match the surge in prices,” he said. “I think it’s naturally a good thing for wages to go up as skills and productivity increase – that’s what we want to see.

“But when a country faces an inflationary problem you can’t just pay more and spend more, you have to find ways of tackling the underlying causes of inflation.

“If wages continue to chase the increase in prices, then we risk a wage-price spiral such as this country experienced in the 1970s.”

Unions reacted with anger, with the TUC accusing Mr Johnson of abandoning his commitment to build a “high-wage economy” with “nonsense” claims about raises.

But the Prime Minister warned big pay rises could create “stagflation” – inflation combined with stagnant economic growth, which blighted the 1970s.

He stopped short of explicitly repeating Bank of England governor Andrew Bailey’s suggestion that workers should not ask for big pay rises to help control inflation, which is forecast to hit around 10 per cent this year.