‘Think and reflect’ before seeking pay rise, says £575,000-a-year Bank of England chief

‘It’s a societal question but I am not preaching about this’ says governor Andrew Bailey

Emily Atkinson
Tuesday 17 May 2022 07:18 BST

Related video: Alok Sharma says inflation is spiking around the world

Workers should “think and reflect” before asking for pay rises, £575,000-a-year Bank of England chief Andrew Bailey told MPs on Monday.

The governor said high earners in particular should consider the impact of inflation before seeking salary top-ups as prices rises.

It comes as the Office for National Statistics (ONS) is later this week expected to confirm inflation has passed eight per cent, while the Bank of England itself has warned it could is likely to peak at 10.25 per cent by the end of the year.

Mr Bailey told MPs on the Treasury select committee: “I spoke in an interview about this. I do think people, particularly people who are on higher earnings, should think and reflect on asking for high wage increases.

Andrew Bailey has defended the Bank of England’s policy actions but warned that food prices could surge further

“It’s a societal question. But I am not preaching about this. I was asked if I have taken a pay rise myself this year and I said no, I had asked the Bank not to give me one, because I felt that was the right thing for me personally.

“But everybody must make their own judgement on that. It’s not for me to go around telling people what to do.

“In that sense I know I may have been interpreted as doing that, but I wasn’t. What I was saying is that maybe people should reflect on it, particularly people in that situation.”

But unions hit back at Mr Bailey, saying he should not “lecture” workers about wage restraint.

Unite general secretary Sharon Graham said: “Yet again workers are being asked to pay the price, this time for inflation and the energy crisis. Inflation has not been caused by workers. Why should they be expected to pay for the failures of the energy market and the total shambles of government policy?

“Workers don’t need lectures from the governor of the Bank of England on exercising pay restraint. Why is it that every time there is a crisis, rich men ask ordinary people to pay for it?

“Enough is enough, we will be demanding that employers who can pay, do pay. Let’s be clear, pay restraint is nothing more than a call for a national pay cut.”

While defending the central bank’s monetary policy, Mr Bailey warned of an “apocalyptic” risk of soaring global food prices sparked by the war in Ukraine.

Mr Bailey told MPs he felt “helpless” despite households being battered by soaring inflation.

“The main driver of inflation and what brings it down is the very big, real income shock which is coming from outside forces and, particularly, energy prices and global goods prices,” he said.

“That will have an impact on domestic demand and it will dampen activity, and I’m afraid it looks like it will increase unemployment.

He told the committee that “we are walking a very narrow path” between surging inflation and risks to growth.

Mr Bailey said the war in Ukraine has resulted in an unpredictable jump in inflation, highlighting that there is still a “major worry” over further rises in food prices due ongoing conflict.

He said: “The Ukrainian finance minister said is that there is food in store but they can’t get it out.

“While he was optimistic about crop planting, as a major supplier of wheat and cooking oil, he said we have no way of shipping it out and that is getting worse.

“It is a major worry for this country and a major worry for the developing world.

“Sorry for being apocalyptic but that is a major concern.”

In March, UK food inflation increased by 5.9 per cent and is expected to accelerate in the coming months.

The governor also the committee that he does not think the Bank “could have done anything differently” to avoid sharp price rises.

“There have been a series of supply shocks, most recently with the impact of the war – Russia’s invasion of Ukraine.

“We can’t predict things like wars – that’s not in anybody’s power.”

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