Gordon Brown and Alistair Darling will attempt today to face down growing union fury over public sector pay and the state of the economy.
The Chancellor will make it clear that borrowing will rise to help boost the economy. But faced with threats of strike action over pay, he will warn unions leaders that stability is "not an optional extra" and declare that ministers will take no "unnecessary risks" with the economy. Mr Brown and Mr Darling will be confronted by demands to scrap the Government's cap on pay deals and to impose a windfall tax on energy companies to fund help for families suffering in the economic downturn.
But in a speech to the Trades Union Congress in Brighton, the Chancellor will say: "We should not forget what together we have achieved over the past 11 years. And that is why I am determined that we should not put those achievements at risk by taking unnecessary risks with economic stability. A stable economy is not an optional extra. It's a means to an end – fairness; rising prosperity; opportunities for all."
Union leaders predicted Mr Darling would face a "frosty" reception, while Mr Brown will face demands for public sector pay rises when he addresses the TUC's annual dinner in private this evening.
Mr Darling will face hostile questions from delegates on the floor of the congress, while union leaders will send a blunt message to Mr Brown in private. One senior union official said: "Mr Brown was heard in respectful silence last year when he was at the height of his popularity. It won't be the same this time. It could be frosty."
Yesterday, leaders of Britain's biggest unions, Unite and Unison – which between them provided more than a quarter of Labour's funding last year – stepped up the pressure on Mr Brown, lambasting the Government's 2 per cent limit on public sector pay deals and demanding a windfall tax on "greedy" energy companies.
Dave Prentis, general secretary of the public sector union Unison, warned that government action to ease the housing crisis was "too little, too late." He said: "Our Government needs to start listening to the people who support it and need it. Unless there is a change of heart on this unfair pay policy, millions of public sector workers will desert Labour."
Tony Woodley, joint general secretary of the giant Unite union, Labour's big-gest affiliate, published a "dossier of disgrace" showing huge rises in energy company profits and demanded that Mr Brown takes action to impose a windfall tax. Ninety Labour MPs have signed a petition calling for a tax to fund help for people in fuel poverty.
He said: "Our case for a windfall tax is compelling. It is morally right. So I say to the Government, it's time to do the right thing and protect the most vulnerable in society."
Earlier, leaders of the major public sector unions warned of a series of co-ordinated strikes this winter to press their case for lifting the cap on wage deals. Mr Brown also faces the embarrassing prospect of a mass protest over pay in central London. Mark Serwotka, general secretary of the PCS civil service union, condemned the cap on public sector pay. He said: "This is one of the clearest signs that the Government has totally lost the plot. It's completely hypocritical of the Government to celebrate public sector workers when in opposition, then attack them when in office."
Joyce Still, from Unite, said the pay policy was "a betrayal of trust and faith in our Labour Government."
The Conservatives tried to capitalise on union disillusionment with Labour, issuing an open letter urging union members to join the party. George Osborne, the shadow Chancellor, said they had a "welcome home" in the Conservative Party.
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