PowerGen plans inflation-busting 5% rise

Stung by criticism of boardroom pay, PowerGen is expected to offer its 4,000 workers an inflation-breaching wage rise this year of 5 per cent.

The two-year package, set to be tabled today by the privatised electricity producer, is also understood to involve an inflation-proof second-stage payment. The offer will form a target for half a million workers elsewhere in former state industries.

The Independent learnt of the proposal yesterday at the same time as the Government announced a 3.4 per cent increase in the Retail Price Index. The offer will prompt ministerial concern over future inflation rates as employees in the rest of the economy receive rises in basic pay of around 3 per cent.

Ed Wallis, PowerGen's chief executive, who received £900,000 from share options last year on top of more than £400,000 in pay and benefits, fuelled public anger further over directors' earnings on Tuesday at the Commons Select Committee on Employment. Mr Wallis referred to three posts from which he earns another £36,000 as "little jobs", indicating that they were hardly worth mentioning.

It is thought that PowerGen has made the offer not only because of sensitivity over directors' earnings, but in order to sweeten the blow of further redundancies revealed at the Commons committee hearing.

Sir Colin Southgate, the company's £150,000-a-year part-time chairman, disclosed that PowerGen was planning to shed between 700 and 1,000 jobs, on top of the 5,400 jobs lost since privatisation in 1991.

At National Power, the larger of the two privatised electricity generators, the 6,000 employees have been offered a minimum of 2.75 per cent, plus a one-off lump sum of £460.