British workers are caught between a rock and a hard place – Andrew Bailey has shown that

The Bank of England governor has tried to clarify his comments on wages after facing criticism, writes James Moore

Bank of England boss Andrew Bailey said the UK has suffered an external shock as a result of soaring wholesale energy prices (PA)

The Bank of England’s governor Andrew Bailey has been on the defensive ever since he told workers not to ask for a pay rise. Sorry, ever since he said he wanted to see “restraint in pay bargaining”.

Small wonder. Comments like that from a man earning £576,000, including pension, were never going to go down well at a time when increasing numbers of Britons are struggling to afford the basics.

Bailey seemed reluctant to quote that figure when it was compared to the median average wage in the UK (about £31,000) and the average wage for a care worker (£19,000) at a hearing of the Treasury Committee.

It is, however, a matter of public record so the honourable members were able to quote it for him.

Britain, Bailey responded, has suffered an external shock as a result of soaring wholesale energy prices – likened to a tax on the nation – which he and his colleagues can do precious little about.

Their concern, he said, is over the “second round” effects which may follow. He explained that pay increases would contribute to those by further pushing up prices. The Bank, Bailey argued, would then have to respond by increasing interest rates, leading to an economic slowdown and higher unemployment.

Such a scenario would hit poorest Britons hardest. It always does.

Trouble is, they’re already suffering badly while HSBC, and now Barclays, have shamelessly pumped rocket fuel into their bonus pools. They were increased by 31 per cent and 23 per cent respectively.

Bailey did allow that banks should “reflect on the economic situation we’re in”, which there is scant sign of their doing.

If he makes good on his promise to visit a care home, and heeds the GMB union’s call for him to shadow a worker in that sector, they might care to ask him why he seemed to reserve his stronger statements on pay restraint for the already low waged who’ve been struggling to keep up for years now.

Kate Bell, the TUC’s chief economist, has made the point that in real terms wages are only now starting to approach their pre-financial crisis levels. The fruits of Britain’s recovery from that economic shock, such as it was, barely reached Britain’s poorest. They barely reached those in the middle.

There has been some recognition from the Bank as an institution, or at least from parts of it, that pay hasn’t risen as it ought to have during previous periods of tight labour markets.

Andy Haldane, its former chief economist, once described this as “the weak wage puzzle”. Other economists, working in the same offices at Bailey, have cited the relative weakness of unions as a problem.

Wage settlements are markedly better where they are involved in collective bargaining because unions are capable of levelling the profound power imbalance between employer and employee, which persists even when jobs are relatively easy to find. Trouble is they have been hamstrung by decades of repressive Tory legislation.

Bailey could do worse than joining one in recognition of how poorly thought-out his comments were, a suggestion made during the hearing. His subs would certainly be welcome.

But while he deserved the spell in the stocks he’s had, all the more so in the context of those unconscionable bonus announcements, it is worth examining the role of government in all this too.

No 10 implicitly rebuked Bailey in the wake of his initial wage comments, saying pay restraint was not something the government was calling for, followed by its stock line about desiring a “high-wage, high-growth economy”.

Little enough is being done to foster that laudable aim. Instead, the Treasury is taking money out of people’s pockets.

It isn’t just energy prices that are reducing people’s disposable incomes. There is also a 1.25 per cent rise in national insurance on the way, which will affect employees and employers alike.

The tax rise is, we are told, to be used to fund the NHS and social care. But there were other options available to Rishi Sunak. Taxing Britain’s vast stock of wealth would be one.

Putting the burden on working people, who are already facing difficulties, was an explicit political choice he and Boris Johnson made.

Workers have, in a very real way, been left caught between the rock of Bailey’s Bank and the hard place of Sunak’s Treasury – all while the City of London parties.