Brown insists 'bad old days' of pay rises must not return

Gordon Brown will issue a stark warning today about excessive pay rises across the private sector as he tells public sector unions there will be no return to the inflation-busting pay deals of the past.

He will use a speech to the British Chambers of Commerce to outline a tough stance on pay, warning that a failure to impose pay restraint would jeopardise economic stability.

Mr Brown will warn that there will be no return to high wage deals of the past.

He will say: "Our message on pay is clear: There must be no return to the bad old days of pay irresponsibility in the private sector and we will tolerate no irresponsibility in the public sector."

His speech, which comes amid concern over "fat cat" pay awards to company executives, will reignite the row over boardroom and shop floor pay.

Mr Brown will say: "In the past Britain usually fell into recession after two inflationary bursts - an initial burst of inflation when demand got out of control, and then a second burst of inflation when wage negotiators sought to catch up with expected high inflation in their pay claims.

"But I can tell everyone who depends on a wage or salary that under our new model of Bank of England independence, inflation is now less than 2 per cent and it is set to be just 2 per cent in the next and subsequent years. And that in this upturn when Britain must seize the opportunities by being fully competitive, both private sector and public sectors must show pay responsibility."

The Chancellor will also rebuff public sector unions angry over plans to shed thousands of civil service jobs and insist that the Government will not bow to demands for substantial public sector wage rises. Last week 90,000 civil servants from Job Centres, benefits offices and the Home Office walked out in a 24-hour strike over pay.

But Mr Brown will say: "Civil service unions should also know that not only will we proceed with the 40,500 job reductions in the Department for Work and Pensions and the Inland Revenue and Customs - reducing administration costs across Whitehall from the 4.6 per cent we inherited to 3.7 per cent by 2008.

"There will be no going back to the old days of inflationary pay deals that would put hard-won economic gains in jobs, prosperity and stability at risk.

"Once a stop-go economy, Britain is now one of the more stable. And we will do nothing to put that at risk."