Green Budget: Pay Curbs - Brown urges wage restraint to fuel economic growth

Gordon Brown yesterday told pay review bodies covering 1.3 million public service employees that there should be no salary increases without compensating improvements in productivity.

In meetings with the bodies' chairmen before his pre-Budget statement, Mr Brown said the Government could not countenance any wage increases unless they were financed out of existing budgets dictated by the previous administration.

In fresh submissions to the bodies yesterday, he reminded them that there was no public spending round this year and there would be no access to the Government's reserve to fund pay increases which breached last year's expenditure limits.

Although his hardline remarks were made specifically to the chairmen of the pay review bodies, they were also aimed at the five million workers in the public sector as a whole and employers in private industry who may be tempted to increase wages to cope with skill shortages.

Union leaders in the public sector will argue that such a policy inevitably means thousands more job losses if employees are to receive a pay rise.

The Chancellor told the chairmen, who cover employees from army generals and Whitehall mandarins to teachers and nurses, that there would have to be a responsible approach to remuneration.

While not wishing to impinge on the independence of their committees, he said that paying more now would mean that the Bank of England might increase interest rates. The alternative was to exercise "pay responsibility" with the benefit of securing more jobs in future.

"A responsible approach by all those involved in pay bargaining, combined with success of the Government's labour market reforms, would allow the economy to grow faster than would otherwise be possible," a Treasury statement said.

In his speech to the House of Commons, Mr Brown acknowledged short-term pay pressures were building up because of the lack of suitably qualified labour.

"The more that we all take a long-term view of what the economy can afford, the more we will be able to have job creation and keep inflation and interest rates as low as possible. So we must all be long-termists now."

He agreed that the Government's reforms would take time. "But it is in no one's interests if today's pay rise threatens to become tomorrow's mortgage rise. The worst form of short termism would be to pay ourselves more today at the cost of fewer jobs tomorrow and lower living standards in the very near future."

To cope with skill shortages, the Chancellor announced pilot projects under which any employer who took on and trained a young or long-term unemployed person and kept them on, could receive "up-front" 75 per cent of their allocation under the New Deal programme.

Start your day with The Independent, sign up for daily news emails
Sport
footballHe started just four months ago
News
Nigel Farage celebrates with a pint after early local election results in the Hoy and Helmet pub in South Benfleet in Essex
peopleHe has shaped British politics 'for good or ill'
News
One father who couldn't get One Direction tickets for his daughters phoned in a fake bomb threat and served eight months in a federal prison
people... (and one very unlucky giraffe)
Arts and Entertainment
Sink the Pink's 2013 New Year's Eve party
musicFour of Britain's top DJs give their verdict on how to party into 2015
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

Aren’t you glad you didn’t say that?

The worst wince-and-look-away quotes of the year
Hollande's vanity project is on a high-speed track to the middle of nowhere

Vanity project on a high-speed track to nowhere

France’s TGV network has become mired in controversy
Sports Quiz of the Year

Sports Quiz of the Year

So, how closely were you paying attention during 2014?
Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

From Armstrong and Miller to Pointless
Sanchez helps Gunners hold on after Giroud's moment of madness

Sanchez helps Gunners hold on

Olivier Giroud's moment of madness nearly costs them
A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect