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We must not bow to strikers’ demands for more pay, warns Treasury & More Trending News

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Local authorities have already begun to succumb to union pressure, with refuse workers in Sussex awarded a pay increase of 24 to 27 per cent, those in Croydon handed 8.5 per cent and a one-off bonus of £750, and Rugby borough council giving a 12 per cent pay rise to workers.

The Bank of England’s chief economist warned on Friday that it may be forced to raise interest rates by half a percentage point for the first time since gaining independence in 1997 if there are signs inflation is becoming embedded.

Huw Pill told Bloomberg TV: “If we see greater evidence that the current high level of inflation is becoming embedded in pricing behaviour by firms, in wage-setting behaviour by firms and workers, then that will be the trigger for this more aggressive action.”

Mr Johnson has been urged by senior Tory backbenchers to ensure the public sector shows restraint on pay.

Kevin Hollinrake, who sits on the Treasury Select Committee, called on Mr Johnson to “step in to provide short-term measures that are more effective and appropriate”.

“We will have to show restraint on pay because the people who are hurt the most by inflation are the very poorest,” he said.

John Redwood, a former Cabinet minister, told The Telegraph, said: “You have to fight inflation and slow down recession at the same time, but the way you do that is with tax cuts.

“I’ve always recommended that where you are giving money back to people, you do it by cutting taxes, like VAT on fuel, so you are achieving two aims at the same time.

“They need to look again at how they can have limited interventions on the tax burden.”

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