RISHI Sunak has ordered bosses to only give pay rises to workers as a reward for success in a bid to drive down inflation.
The Prime Minister insists salary boosts must only be offered if employees hit their targets rather than just blowing cash.
ReutersRishi Sunak insists his plan to tackle inflation is working[/caption]
His warning shot came as inflation cooled to 6.8 per cent in the 12 months to July, down from 7.9 per cent – which was the biggest fall for three decades.
Mr Sunak said: “It’s not for the government to intervene in the pay decisions between companies and their employees.
“As a general rule, we need pay rises that over time are sustainable and that means pay rises that are focused on rewarding productivity increases that’s just a kind of ordinary.
Speaking to ITV News, he said: “That’s that’s what people would expect that as we improve our productivity pay can rise greater – that’s want I want to see.
“I want people to to be paid more, but that means we have to have a growing economy where productivity is rising. That’s how you have sustainable long term increases in people’s pay packets.”
Mr Sunak welcomed the inflation figure yesterday (Wed) bringing it to the lowest level since February 2022 when Russia’s invasion of Ukraine saw global prices rise.
Experts believe his target of 5.3 per cent by the end of December is at risk as pay growth remains high and core inflation which strips out energy and food was unchanged at 6.9 per cent.
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Heidi Karjalainen, of the Institute for Fiscal Studies, said: “The Prime Minister’s target to halve the rate of inflation by the end of the year was always a little odd as there is only so much the Treasury can do to influence the pace of price increases.
“When the target was set, the Prime Minister may have hoped he could rely on falling energy prices to do most of the work to hit it.
“However, the stubbornly high rate of price inflation for goods and services other than food and energy has put the target in jeopardy.”
Inflation is forecast to go up over the summer with the higher cost of wages and clothing. The Bank of England will be under pressure to raise rates next month.
George Bibb, head of the IPPR’s centre for economic justice, said: “There is a very real risk that a recession may soon overtake price rises as the main economic concern.”