Chancellor Appeals for Pay Restraint as Soaring Food and Petrol Prices Push Inflation to 11-Year High of 3.8%; Rise Will Make It Harder for Bank to Deliver Cuts in Interest Rates
Byline: Russell Lynch
CHANCELLOR Alistair Darling hasurged pay restraint on Britain's workforce as inflation rose to a record high.
Mr Darling's plea came as soaring food and petrol prices pushed the Consumer Prices Index to 3.8% in June - the highest since January 1997 and almost double the Bank of England's 2% target.
But the Chancellor warned against inflationary pay rises, which would in turn drive prices even higher.
"I have said again and again, whether you are in the private sector or the public sector, whether you are sitting in the board room or working on the shop floor, we cannot allow inflationary wage increases," he said yesterday.
His comments drew fire from union leaders as a 48-hour strike by hundreds of thousands of local authority staff in Wales, England, and Northern Ireland is due to start today, over a 2.45%wage offer.
TUC general secretary Brendan Barber said families were increasingly concerned at how to make ends meet in the face of surging household bills.
"The growing gap between wages and inflation is the reason why thousands of council workers will reluctantly be going on strike," he said.
"Claims that decent wages will lead to spiralling inflation are wrong. There is no evidence that pay awards are driving prices upwards now and no evidence that they will do so in the future."
Shadow Chancellor George Osborne said inflation was now more than double the level seen when Labour came to power in 1997.
Liberal Democrat Treasury spokesman Vince Cable added: "We are now facing the start of an economic climate worryingly reminiscent of the 1970s, with falling demand, rising unemployment and rising inflation."
Shoppers bore the brunt of soaring foodbills in June, the Office for National Statistics (ONS) said. The biggest price rises were for beef and sausages while rises for other staples such as milk, bread, rice and biscuits added to the pressure.
Annual food inflation is running at almost 10%- lifting CPI to the highest level since records began in 1997. …