Workers are entitled to ask for a pay rise after a gruelling pandemic and faced with a severe cost-of-living crisis, Keir Starmer has said as official figures showed wages falling in real terms.
The Labour leader’s call came in contrast to comments by the Bank of England governor, Andrew Bailey, who warned this month that wage rises would fuel inflation, saying the UK needed to see “restraint in pay bargaining, otherwise it will get out of control”.
Data from the Office for National Statistics on Tuesday showed real wages fell behind increasing inflation, which is likely to exacerbate the cost-of-living squeeze from rising prices, high energy bills and a national insurance rise this April.
In veiled criticism of Bailey’s comments on pay, Starmer said it was reasonable for workers to demand higher wages but said he wanted to put the main onus on the government to tackle the cost of living. “It’s very difficult to universally say to people – you are not entitled to even ask for a pay rise,” he said.
Bailey’s remarks, which were prompted by fears that higher wage demands could push companies to increase prices further, sparked widespread criticism including from trade unions and the chair of Tesco, plus a rebuke from Downing Street.
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Inflation in the UK increased to the highest rate for three decades in January as the impact of rising energy bills fed into a wide range of goods and services, adding to the squeeze on household living standards.
The Office for National Statistics (ONS) said the consumer prices index (CPI) measure of inflation increased to 5.5% in January from 5.4% a month earlier, driven by prices for clothing, footwear and furniture.
City economists had forecast the inflation rate to remain at 5.4%. The ONS said inflation was last higher in March 1992, when it stood at 7.1%.
With inflation predicted to hit more than 7% in April, the latest increase is expected to heap further pressure on the government, while putting the spotlight on the Bank of England to raise interest rates again.
Business and consumer groups warned the rise in prices since last summer would harm living standards and push more firms towards insolvency. The CBI lobby group said the government needed to react by cutting taxes on investment to boost productivity and allow businesses to award sustainable annual wage rises.
Suren Thiru, the chief economist at the British Chambers of Commerce, said he expected the Bank to raise rates at its March meeting to 0.75%. Threadneedle Street raised rates in December and February to the current level of 0.5% against a backdrop of surging inflationary pressure.
However, Thiru warned that tightening monetary policy too quickly risked undermining confidence and the wider recovery. “[It] will do little to curb the global factors behind the current inflationary surge,” he said.
“More needs to be done to limit the unprecedented rise in costs facing businesses, including financial support for those struggling with soaring energy bills and delaying April’s national insurance rise.”
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