UK Prime Minister will force real wage cuts on public sector workers. This year, public sector pay increases will be below the rate of inflation, currently running at 4.3 percent. Pay restraint will "allow" the Bank of England to reduce rates.
Unfortunately, Brown has this all upside down. Tighter monetary policy reduces inflation; keeping public sector wages down just creates a bitter disaffected workforce.
LONDON: The British government's move to limit public sector pay increases has helped keep the country's economy stable as it enters a year of global economic turbulence, Prime Minister Gordon Brown said Sunday.
Brown said the world faced a difficult year ahead, but that he was "cautious but positive" about Britain's economic prospects based on its record of low inflation, high employment and economic stability over the past decade.
Pay restraint now will prevent inflation running out of control — as it has happened in the past when oil and food prices spike — and will permit interest rates cuts to ease the burden of mortgage payments, Brown said.
"I want to pay the police more, I would like to pay the nurses more, I would like to pay all these major public sector groups more," Brown said on British Broadcasting Corp. television.
Britain's police union is campaigning for the right to strike after Brown's government staggered a 2.5 percent pay increase, effectively reducing it to 1.9 percent — which is below the annual rate of inflation.