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Pay restraint to ease inflation

Pay restraint to ease inflation

LONDON, June 22 (Reuters) – British Finance Minister Alistair Darling called on Sunday for pay awards to be kept in check to ensure they did not add to inflationary pressure in the UK economy.
“It’s important that we don’t allow inflation to become entrenched here at home,” Darling told BBC television. “Pay awards in both the private and public sector have to be consistent with our inflation target, which is 2.0 percent.”
“The last thing on earth you want is to allow inflation to take hold again because rising prices would erode peoples’ living standards and nobody want that.”
Data released last week showed inflation reached its highest level in Britain in 11 years. Inflation rose to 3.3 percent in May, the highest since the Labour government came to power in 1997.
The Bank of England has said inflation may rise above 4 percent this year, but policymakers have to balance that with a risk that sharply slowing economic growth will push it below the 2 percent target in two years’ time.
Prime Minister Gordon Brown said last week that government ministers would forego their annual pay rise to set an example to others.
“People have been getting pay increases … particularly in the public sector … in the last 10 years.” Darling said.
“But … if we want to avoid getting ourselves back into a situation we had in the past, where every penny of a pay increase was eaten up by rising prices, that would be huge mistake.”

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