‘No alternative’ to rising inflation amid labour shortages, Boris Johnson says

Prime minister brushes off fears of rising prices, as he claims UK heading for ‘higher-wage, higher-productivity economy’

Boris Johnson has said there is “no alternative” to wage-fuelled inflation and interest rate rises, as he urged businesses to pay workers more to beat the supply chain crisis.

In a series of TV interviews at the Conservative conference in Manchester, the prime minister brushed off concerns that increasing pay for HGV drivers and other shortage occupations will drive up prices in the shops.

His comments came amid warnings of 1970s-style inflation driven by shortfalls of workers resulting from the Covid pandemic and the removal of free movement rights from EU nationals following Brexit. Inflation is currently running at 3 per cent and forecast to spike higher.

Mr Johnson argues that, following Brexit, the UK is going through a “transition” from a low-wage, low-productivity economy reliant on cheap labour from overseas to a higher-wage, higher-productivity model in which businesses are forced to improve the pay of home-grown workers and invest in innovation and skills.

ITV’s political editor Robert Peston challenged the PM over whether his approach risked reducing productivity and fuelling inflation, with the result that interest rates - and consequently housing costs and the price of borrowing - could spike.

Mr Johnson replied: “In a famous phrase, there is no alternative. There is no alternative.

“The UK has got to - and we can - do much, much better by becoming a higher-wage, higher-productivity economy.”

The PM’s “no alternative” quote came from Tory predecessor Margaret Thatcher, who came into power in 1979 with price rises running out of control at around 15 per cent a year, and devoted much of her premiership to bringing rates down by reining in wage inflation.

In a sharp break from Mrs Thatcher’s approach, Mr Johnson and other ministers have in recent days suggested that rising pay for workers such as HGV drivers is a benefit of Brexit, and have accused business leaders of wanting to reopen the doors to cheap migrant labour.

Asked by the BBC whether he was worried about inflation, Mr Johnson replied: “I believe that supply will match demand. That is what we want to encourage, and we want to encourage people to invest in.”

Investment in skills and infrastructure would boost productivity and growth and produce a “higher-wage, higher-skill economy”, he said.

And asked on Sky News whether the danger of inflation concerned him, he replied: “People have been worrying about inflation for a very long time. I’m looking at robust economic growth. And by the way, those fears have been unfounded.

“I’m looking at robust economic growth. I think that the supply systems that we have, logistics, the supply chains we have are incredibly clever and robust and supply will meet demand.”

Mr Johnson again made clear that he regards it as the job of business, rather than government, to resolve issues in the supply chain which have seen petrol stations run dry, left supermarket shelves empty and forced farmers to prepare to cull animals and let fruit rot in the fields.

“I’ve got every confidence that, rather than government stepping in to patch and mend every bit of our supply chains, what you’ve got in this country is fantastic expertise, a fantastic skill in logistics,” he said.

“You listen to some of the supermarkets - they will manage this. We will help with visas and all the rest, we’ll help with all the supplementary labour that is requested.

“But in the end, this is a problem of global growth. The UK has got the fastest-growing economy in the G7. And that’s putting some pressure on some parts of the system.”

Despite having imposed a pay freeze on 2.5m public sector employees, Mr Johnson claimed that the government had done “everything we can to increase pay”.

“We’ve increased nurses’ pay very considerably, butt as everybody knows, times have been very, very tight, we’ve had to spend £407bn supporting people through the pandemic, and overwhelmingly in the last few years public sector pay has outstripped private sector pay,” he said.

“I’m not relaxed by anybody’s feeling of hardship and we’ll do everything we can to help.”