Pay rises in line with inflation ‘reckless’, says Downing Street

Workers asked to accept below-inflation pay hikes while pensions and benefits set for double-digit rise

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Downing Street has said it would be “reckless” to raise public sector pay in line with inflation.

The comment came after chancellor Rishi Sunak indicated that pensions and benefits will retain their link to price rises, setting the scene for double-digit percentage increases next year.

His assurance came despite Boris Johnson urging workers to accept pay hikes well below the inflation rate, currently running at 9.1 per cent and forecast to hit 11 per cent later this year.

The PM has warned that pay rises at or close to the inflation rate for striking rail workers risked triggering an inflationary spiral which would undermine the value of pay packets across the board.

Asked why the government believed that increases in pay would fuel inflation, while pension rises would not, the PM’s official spokesman said: “I’m not going to jump ahead to what it will or won’t be next year in terms of pensions.

“Most commentators recognise that the primary risk from current high levels of inflation that becomes embedded through the labour market, and through wages, there’s not the same risk of this spillover effect to private sector wages from any increase to the state pension age.”

Asked if the prime minister is worried about fuelling intergenerational resentment between working-age people and older pensioners, he said: “We will keep explaining to the public why we think this is the right approach.

“We are confident that the public will understand that it would long term have a bigger impact on their take-home pay if we were to take actions – reckless actions – now that could spike inflation.

“It’s important to stress that does not mean we do not want to reward public sector workers with a pay rise. We do.

“It’s just we must make sure that we don’t do anything that has a knock-on impact which feeds into this global inflationary spiral that there is the potential to see.”