We must not bow to strikers’ demands for more pay, warns Treasury

Local authorities have already begun to give in to union pressure, with refuse workers in Sussex getting a 24-27 per cent pay rise, those in Croydon 8.5 per cent and a one-off £750 bonus and Rugby City Council a 12 per cent pay rise for worker.

The Bank of England’s chief economist warned on Friday that it may be forced to raise interest rates by half a percentage point for the first time since independence in 1997 if there are signs that inflation is taking hold.

Huw Pill told Bloomberg TV: “If we see more evidence that the current high levels of inflation are embedded in the way firms price, wage set, firms and workers, then that will be the trigger for this more aggressive move. ”

Mr Johnson has been urged by senior Tory backbenchers to ensure the public sector shows restraint on pay.

Kevin Hollinrake, who sits on the Treasury Select Committee, urged Mr Johnson to “intervene to provide near-term measures that are more effective and proportionate”.

“We will have to exercise restraint on payments because the people who are hit hardest by inflation are the poorest,” he said.

John Redwood, a former cabinet minister, told The Telegraph: “You have to fight inflation while slowing down the recession, but you do that with tax cuts.

“I’ve always recommended that when you give people back money, you do it by reducing taxes like VAT on fuel, so you’re doing two things at once.

“They need to reconsider how they can have limited intervention in the tax burden.” We must not bow to strikers’ demands for more pay, warns Treasury

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