PUBLIC sector workers have been told to expect real-terms cuts in their wages as part of UK Government efforts to avoid the “evil” of a 1970s-stile inflationary spiral.
The chief secretary to the Treasury said there was a need for “collective society-wide responsibility”, adding: “We cannot have inflation-busting pay increases”.
Simon Clarke said that if pay demands chased inflation it would “bake in” a repeat of the wage-price spiral seen in the 1970s, which would be “absolutely destructive”.
His comments come as the country faces its biggest rail strike in 30 years, with 40,000 RMT workers due to walk out tomorrow, Thursday and Saturday, crippling services UK-wide.
Independent public-sector pay review bodies determine pay for UK Government employees.
Mr Clarke claimed he was not going to pre-empt their work, but said it was “unlikely” they would match the headline rate of inflation, currently 9 per cent and set to hit 11% in October.
Asked on BBC Radio 4’s Today if public sector workers should not expect a pay rise in line with inflation, Mr Clarke replied: “Correct.”
He said: “In the current landscape of inflation at 9% bordering 10%, it is not a sustainable expectation that inflation can be matched in payoff…
“We cannot get into a world where we are chasing inflation expectations in that way because that is the surest way I can think of to bake in a repeat of the 1970s, which this Government is determined to prevent.”
He said that while “we enormously value the work of all of our public sector workers”, the “absolutely destructive” inflation of the 1970s could only be averted “if we have a realistic expectation now about pay”.
Earlier this year the Prime Minister’s spokesman said that Bank of England Governor Andrew Bailey’s plea for wage restraint was not the Government’s position.
But Mr Clarke made no attempt to hold to that position.
“What a spokesperson has said is for them. I’m clear that the reality is that we are trying to manage the inflation difficulties that this economy and indeed the wider West is facing.”
Mr Clarke also told Sky News: “Public-sector pay discipline really matters here.
“We have an inflation problem in this country … If we don’t want that problem to either intensify or prolong itself, then we need to be sensible around pay awards.
“If we give awards which are above inflation in this landscape, then we are in a really difficult place in terms of bringing down inflation, which in turn obviously is driving the cost of living.
“We cannot have inflation-busting pay increases. The Government is trying in good faith to manage what is a very difficult balancing act between making sure that people get the pay awards they deserve … this has to be set against the wider responsibility I have, the Government has, to the public finances to make sure they are sustainable.”
He said pay awards for Government employees currently being recommended by independent pay review bodies were “coming in at a sensible level”.
But he added: “People have to recognise that if we’re going to forestall the evil of inflation – inflation destroys savings, it destroys growth, it damages any economy where it gets an endemic grip – then we’re going to have to show collective society-wide responsibility”.
“I’m not going to pre-empt the results of the individual pay review bodies but I think it is unlikely that they will match the headline rate of inflation at the rates we’re now seeing.”
Asked if a recession was inevitable and necessary to halt inflation, Mr Clarke told Times Radio: “We don’t expect a recession, it’s important not to talk ourselves into that mindset”.
While there are significant global economic challenges, “there are also considerable underlying strengths to the UK economy”, he said.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here