The governor of the Bank of England has appeared to backtrack on his comments that employees should not ask for pay rises in order to curb inflation.
Earlier this month Andrew Bailey said there needed to be a “moderation of pay rises” after inflation hit a 30-year high of 5.4% in January. The CPI rate of inflation is expected to peak at 7.25% in April 2022.
His comments came under fire from trade unions and even the prime minister, whose spokesperson said: “We obviously want a high-growth economy and we want people’s wages to increase.”
However, responding to questions from MPs on the Treasury committee this week, Bailey appeared to climbdown on his plea for restraint, stating: “I’m not saying people should not take pay rises. I did make the point it was in the context of large pay rises. And my concern is the second-round effects. If everybody tries to get ahead of the shock we’ve had from outside, then we’ll get the second-round effects and it will get worse. That’s the problem.”
He said that pay restraint should be employed by “everybody”, yet struggled to answer when asked how much he was personally paid compared with the median UK wage of £31,285.
Pay and inflation
“[It’s] substantially higher. It’s somewhere over £500,000, I can’t tell you exactly what it was. I don’t carry that around in my head,” he said.
The latest analysis by XpertHR found pay awards have seen their biggest increase in more than a decade, with the median pay award reaching 3% in the three months to the end of January 2022.
Bailey said it was worrying that poorer households would most likely bear the brunt of the rising cost of living.
“It’s those with the least bargaining power in the labour market that lose out in this situation,” he said. “In a process where there are people trying to offset the shock to real income, some people will be better able to do it than others.”
He said he would visit a care home to see how low-paid workers were managing with rising inflation.
“I don’t think it’s appropriate for me as governor of the Bank of England to make an observation about the pay level of a particular group in society,” he said. “[But] I will take my governor’s hat off for a moment.
“My mother was in a care home for several years, I have close experience. I have enormous respect for people who work in care homes. It is a very, very difficult environment for people to work in.”