Stagflation

Although Mervyn King did not mention the S word in his speech last night, he did say that people should expect their real pay to stagnate this year and that inflation, now 3.3%, is a problem which needs to be stamped out sooner rather than later. Darling Darling reinforced the message, saying that the unions' calls for higher pay rises could be disastrous. Ministers have foregone a pay rise to try to set an example but the unions are sensing that power is returning to their hands. They fund the Labour Party. They are dissatisfied with Brown. They want to fund individual MPs who support their causes, rather than sending cash to the central Party coffers. The Police forced Jacqui Smith's hand. They want a 3.5% pay rise next year. Unison has rejected a 2.45% offer. The average pay increase in the first quarter of this year was 3.8%. The Shell tanker drivers have secured a 9% rise this year and 5% next. The Government is living in a fantasy world if it believes that the workers will follow the self-denial of its Ministers.