Wage deals keep pace with cost of living

The level of annual pay awards has hit 3 per cent over the summer, according to figures that show wage bargainers are ignoring the Government's new inflation measure.

The average wage deal came in at 3 per cent over the three months to July, according to Industrial Relations Services. IRS revised up its estimates for the previous three months from 2.9 to 3.0 per cent. This is in line with the headline rate of inflation but almost double the 1.6 per cent consumer prices index used by the Bank of England to set interest rates. The figures mean that employees' pay on average is keeping pace with the rising cost of living.

Sheila Attwood, the editor of the IRS's pay and benefits journal, said: "It will be interesting to see how private-sector pay responds to the increase." Earlier this year, Gordon Brown told a House of Lords committee that he expected public sector negotiators to use the CPI rate when striking deals.

There was no sign of a gap opening up between the two sectors, according to the IRS report that showed private and public pay deals hitting 3 per cent. The largest pay deal in the economy, covering 1.3 million local government workers and effective from 1 April, came in at a below-trend rate of 2.7 per cent. Ms Attwood said: "If the rest of the public sector follow their lead, pay settlements here will be an enviable benchmark for private sector employees. However, bargaining in the sector has been slow to get off the ground this year, and it may be some time before we see a settlement picture emerging."

The IRS survey covered 61 pay deals between 1 May and 31 July, covering 250,000 workers.