Companies should be asked to rein in profits instead of workers urged to limit pay demands, angry union leaders have told the Bank of England.
A furious row erupted after the BoE governor called on employees to show restraint, warning of the impact of high inflation on those who don’t have ‘bargaining power’.
Andrew Bailey said the problem was one “we all have to be very conscious of" just a day after warning households would suffer the deepest fall in living standards on record as the UK plunges into a yearlong recession.
Urging workers to scale back their demands, Mr Bailey said: “If everybody tries to beat inflation, it doesn’t come down, it gets worse, that’s the problem.”
He added: “There’s a second problem. I put this in terms of high pay rises and high price increases, because in that world it’s the people who are least well off who are worst affected, because they don’t have the bargaining power. I think that is something that broadly we all have to be very conscious of.”
He said there were a “lot of people… very badly affected by this inflation” which he said was concentrated in rising energy and food prices. He warned that the bank had to act to ensure inflation did not become “embedded”.
“My key point is: If inflation becomes embedded and persistent it gets worse and the effects get worse and that’s why we have to raise rates,” he told BBC Radio 4’s Today programme.
TUC Head of Economics Kate Bell hit back saying: “It’s time for companies to rein in their profits – not for hard pressed workers to cut back even further.
“After the longest and harshest wage squeeze in 200 years, working people in every part of the country are suffering a huge fall in living standards as prices soar. “
“With incomes set to fall even further and the economy teetering on the brink of recession, it’s now more than ever that workers need a pay rise. Without wage increases, working people will simply stop spending on anything non-essential – and that will hurt our high streets, damage business and make a recession very likely, putting jobs at risk up and down the country.
“Making sure people can put food on the table for their family is not going to push up inflation.” She added: “If the Governor is worried that some workers might miss out on negotiated pay rises, he should encourage all workers to join a union.”
