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Minister Claims Inflation-Matching Public Sector Pay Rise Will Cause “Deathly Spiral” Of High Prices

Minister Claims Inflation-Matching Public Sector Pay Rise Will Cause “Deathly Spiral” Of High Prices

The government is refusing to offer public sector workers a pay rise in line with inflation saying it will only push prices up further (Alamy)

3 min read

Technology Minister Chris Philp has defended the government’s decision not to offer public sector workers a pay rise in line with inflation, because he believes this year’s hike in prices are “transitory”.

Philp believes that if "hypothetically" workers across "the whole economy" received a nine per cent wage increase in order to match inflation, it would create a “deathly spiral” which leads to even more inflation. The government is only able to determine pay increases in the public sector. 

“It's like a dog chasing its tail,” he told Sky News. 

Last week rail workers held a series of national strikes over pay, with teachers’ unions set to vote on industrial action as part of what has been dubbed “the summer of discontent”. On Monday, criminal barristers staged the first of several walk-outs in protest over pay. 

Philp said that the government had already offered £37bn of support, targeted largely at those on lower incomes.

He insisted that a number of extraneous factors had prompted the surge in inflation, therefore wage increases would not help people facing the problem in the long term. 

“We're expecting this to be a transitory phenomenon. It's driven by things like the Ukraine crisis, like the COVID situation in China, the supply chain issues," Philp explained. 

“If we have a series of across the board pay increases for everybody, then what's going to happen is that we'll just see even more inflation.”

The minister for technology and the digital economy said if "hypothetically" all people currently in employment got a pay rise of nine per cent – the current rate of inflation, which is widely expected to increase further this year – then "all that would happen is prices would then jump up by another nine per cent the day after” as companies try and find the money to pay those wages.

“Taxes would have to go up to fund it, and to the extent there was excess money floating around in the system that would drive inflation,” he added.

"An across the board pay increase tomorrow for everybody is not how you beat inflation."

Philp said in order to help the less well off deal with the cost of living crisis, the government needs to use “monetary measures” like increasing interest rates and quantitative easing to drive down inflation in the long-term.

This morning postal workers started voting on whether to strike, with around 115,000 members of the Communication Workers Union receiving their ballot papers.

Postal workers are demanding that Royal Mail Group negotiates with them to secure a "straight, no-strings" pay increase for employees, criticising the current offer of two per cent as a "dramatic real-terms wage cut" because of soaring inflation.

Doctors are calling for a pay rise of up to 30 per cent over the next five years, after delegates at the British Medical Association’s annual conference voted to press for a wage increase to make up for real-terms cuts to their salaries over the last 14 years.

It is a major escalation of the push for salary increases by health unions, who are calling for a pay rise that at least equals inflation or risk strike action.

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