Brown urges restraint as pay rises 'too fast'

GORDON BROWN went out of his way to issue a stern warning against inflated pay claims yesterday after official figures showed earnings increasing at well above the rate of inflation.

GORDON BROWN went out of his way to issue a stern warning against inflated pay claims yesterday after official figures showed earnings increasing at well above the rate of inflation.

The Chancellor said: "I am warning people today that we have to be careful - this is a cautionary warning for us that we can't go back to the old ways." He added: "We are not going to relax our efforts. There is going to be no complacency."

In a remark likely to prove controversial, the Chancellor dismissed the suggestion that job prospects were worsening in some regions like the North- east. "Unemployment in the North-east has fallen since the general election," he said. Businesses and unions in the region have been outspoken in their complaints that interest rate policy has harmed its prospects in favour of the South-east. But Mr Brown recently gave the Bank of England his support.

Unemployment fell to another 19-year low last month and the British economy generated 99,000 new jobs during the summer. The tight jobs market boosted pay growth to 4.9 per cent even though inflation is, at 1.1 per cent, at its lowest since 1963. The Chancellor said people had no excuse for not taking work, with vacancies available in every area of Britain. He signalled that next month's pre-Budget report would contain further measures to get people who were out of work into jobs. In particular, the threat of losing benefit for refusing to take a job would be extended from young people to all working-age adults. Mr Brown said: "People can't just stay at home doing nothing when there are jobs available and they are capable of working."

The prudent message is likely to be hammered home in the Chancellor's high-profile Mais Lecture in the City next week. The number of unemployed claimants fell by 5,400 in September, to 1.21 million or 4.2 per cent, according to the new figures. The more reliable international jobless measure showed a fall of 83,000 in the three months to August, to 1.71 million or 5.9 per cent.

At the same time, employment rose to a fresh record. The past 12 months have seen the creation of 294,000 new jobs. Yesterday's figures rounded out a week of rosy economic news. Growth is picking up after the slowdown last winter, the housing market is at its most buoyant since the late 1980s and the headline inflation rate remains at a 36-year low.

Yet the fact that average earnings are accelerating makes it a "dead cert" that the Bank of England will raise interest rates next month, according to one City pundit. With inflation so low, real spending power is expanding rapidly. Tax cuts have also contributed to putting money into the pockets of those in work.