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21/04/2004
Chancellor warns of inflationary day rise damage
Chancellor Gordon Brown has warned of the potential economic damage arising from inflationary wage increases in the public and private sector.
Mr Brown told delegates at the British Chambers of Commerce annual conference that "two inflationary bursts" led to recession. He said that after initial uncontrolled demand, a second inflationary burst followed when wage negotiators sought to catch up with expected high inflation in pay claims.
But Mr Brown warned: "I can tell everyone who depends on a wage or salary that under our new model of Bank of England independence, inflation - as we saw yesterday - is now less than 2%, is likely to be less than 2% this year and it is set to be just 2% in the next and subsequent years.
"And in this upturn when Britain must seize the opportunities by being fully competitive it is vital we complement this anti inflation discipline by both private sector and public sectors showing pay responsibility."
The Chancellor added: "Our message on pay is clear: there must be no return to the bad old days of pay irresponsibility in the private sector and we will tolerate no irresponsibility in the public sector."
Turning to the civil service unions, Mr Brown said that the government would proceed with the 40,500 job reductions in the Department for Work and Pensions and the Inland Revenue and Customs.
This, he said, would reduce Whitehall administration costs from 4.6% to 3.7% by 2008.
Mr Brown said: "There will be no going back to the old days of inflationary pay deals that would put hard won economic gains in jobs, prosperity and stability at risk."
The latest figures on wage inflation indicates that in the three months to February salaries have grown by 4.9%, the highest rise in almost three years.
BCC President Isabella Moore commended the government's performance for providing economic stability.
However, Shadow Chancellor Oliver Letwin condemned a doubling of the regulations faced by businesses. He said that bureaucratic red tape was damaging business performance.
(SP)
Mr Brown told delegates at the British Chambers of Commerce annual conference that "two inflationary bursts" led to recession. He said that after initial uncontrolled demand, a second inflationary burst followed when wage negotiators sought to catch up with expected high inflation in pay claims.
But Mr Brown warned: "I can tell everyone who depends on a wage or salary that under our new model of Bank of England independence, inflation - as we saw yesterday - is now less than 2%, is likely to be less than 2% this year and it is set to be just 2% in the next and subsequent years.
"And in this upturn when Britain must seize the opportunities by being fully competitive it is vital we complement this anti inflation discipline by both private sector and public sectors showing pay responsibility."
The Chancellor added: "Our message on pay is clear: there must be no return to the bad old days of pay irresponsibility in the private sector and we will tolerate no irresponsibility in the public sector."
Turning to the civil service unions, Mr Brown said that the government would proceed with the 40,500 job reductions in the Department for Work and Pensions and the Inland Revenue and Customs.
This, he said, would reduce Whitehall administration costs from 4.6% to 3.7% by 2008.
Mr Brown said: "There will be no going back to the old days of inflationary pay deals that would put hard won economic gains in jobs, prosperity and stability at risk."
The latest figures on wage inflation indicates that in the three months to February salaries have grown by 4.9%, the highest rise in almost three years.
BCC President Isabella Moore commended the government's performance for providing economic stability.
However, Shadow Chancellor Oliver Letwin condemned a doubling of the regulations faced by businesses. He said that bureaucratic red tape was damaging business performance.
(SP)
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