Times will be harder for some than for others
Jun 25 2008 by Andrew Hebden, The Journal
IF anyone needed proof of just how seriously the Bank of England is taking the prospect of spiralling inflation just now, they should have been at the North East Chamber of Commerce Durham and Tees Valley dinner last week.
Deputy governor Sir John Gieve, still reeling from the shambolic handling of his own resignation announcement the previous day, delivered his message in the bluntest terms.
“The next year is not going to be comfortable for anyone,” he warned towards the end of a speech which had been somewhat light on funnies. Well, more comfortable for some than for others, I expect, a point that public sector union Unison has been hammering home.
Yesterday, it announced details of a two-day strike by council workers after rejecting a 2.75% pay offer. Their members – already among the poorest paid and therefore hardest hit by rising fuel and food prices – are facing a pay cut in real terms. It is tough to make a moral argument against these workers as they try to defend the quality of life for their families.
The bald statements from members of the Monetary Policy Committee about the need for us all to take a pay cut for the common good is a bitter pill to swallow for them while they can’t see the evidence that the architects of the current crisis are making similar sacrifices in their ivory towers in the City.
So far, Alistair Darling and Gordon Brown have stood shoulder to shoulder with Bank governor Mervyn King on his insistence that inflation must be regarded as public enemy number one. But the unions can scent blood and have signalled their resolve to stand firm. They know that Messrs Darling and Brown can ill afford to pick a fight with the unions at a time when their own political futures hang precariously in the balance.
Mr King has no such worries and will not back down. If the Government caves in and awards a higher pay settlement – thus fuelling pay settlement expectations elsewhere – he will almost certainly respond by raising interest rates.
Not many people would want to be in Mr Brown’s shoes now. But would you want to be a cleaner on £6.50 an hour and facing spiralling costs and a pay cut?
