Warning of 1970s-style “wage-price spiral” from PM “nonsense”, TUC says

TUC deputy general secretary Paul Nowak has described as “nonsense” a claim made by Boris Johnson that workers in the UK demanding to be compensated for rapidly rising prices could trigger a 1970s-style “wage-price spiral”.

Speaking at a college in Blackpool this afternoon, the Prime Minister vowed to tackle low growth in the economy and the ‘cost-of-living crisis’ but warned that wages increasing in line with prices could unleash an economic crisis.

“It hasn’t taken long for the prime minister to abandon his commitment to a high-wage economy. These claims are nonsense. Energy prices are pushing up inflation – not wages. The only way to give families long-term financial security is to get pay rising across the economy,” Nowak said following the speech.

“British workers are suffering the longest wage squeeze in more than 200 years. They urgently need more money in their pockets. Working people deserve better than they are getting from this government.”

In his speech today, Johnson warned the public that the UK would be “steering into the wind” in the coming months as he cited “global pressures” including the conflict in Ukraine as the cause of increasing inflation and low GDP growth.

“Everyone can see and feel the impact on household budgets: the increases in the cost of food, the spooling digits on the petrol pumps, energy bills growing seemingly ever larger,” the Prime Minister told those watching.

The Organisation for Economic Co-operation and Development (OECD) forecast this week that the UK economy would slow to a standstill next year with the weakest performance in the G20 (aside from Russia) while inflation would remain above 7%.

Johnson claimed that ministers are “on your side” in the crisis but argued that the government needs to reject the “Covid mindset” that more state spending is the answer. He said the government wants to cut taxation “as fast as you responsibly can” but did not make any specific commitment.

The TUC has organised a demonstration on June 18th to march through London, before holding a rally in Parliament Square, to demand that the government takes action on stagnating wages and the worsening cost-of-living crisis.

Trade union leaders criticised Andrew Bailey earlier this year after the Bank of England governor made a similar call for “moderation” in pay rises in order to curb inflation as households struggle with rising energy prices and taxation.

Bailey was later criticised by MPs for calling for wage “restraint” while earning an annual salary in excess of £500,000 and that is 31 times the average pay for a care worker and 18 times that of the UK median for a full-time worker.

The Prime Minster also used his speech today to announce flagship new policy: that lower-paid workers will newly be allowed to use housing benefits to make mortgage payments and the extension of Right to Buy to housing association tenants.

Labour’s Lisa Nandy argued that the announcement showed that Johnson and “his tired government” are “out of ideas”, adding: “You can’t solve a housing crisis with back of the envelope policies that have no realistic chance of success.”

Chief executive of Shelter Polly Neate described the proposals as “baffling, unworkable and a dangerous gimmick”. According to analysis by the housing charity, less than 5% of stock sold through Right to Buy so far has been replaced.