Chancellor Alistair Darling last night predicted a doomsday scenario of soaring inflation and mass redundancies if employers bow to growing pressure to increase wages.
Darling told delegates at the TUC conference in Brighton that pay had to be kept down despite the rising cost of living to avert economic catastrophe.
Union members have spent much of the past two days calling for higher wages, particularly in the public sector where the government is trying to stick to a 2% limit on pay rises. Unions claim that many ordinary workers are suffering as food and fuel bills rocket.
The Consumer Price Index measure of inflation currently stands at 4.4%. But Darling insisted that it was likely to fall next year, as oil prices were beginning to come down.
He added: “That’s why it would be so damaging for us to allow inflation to become entrenched, as it did in the past.
“That’s why, in the private and public sectors, pay rises must be consistent with our inflation target. Otherwise every penny in pay rises will be very quickly swallowed up by higher prices.
“And we all remember the job losses that followed in the past, once inflation takes a grip. Hundreds of thousands out of work, as happened in the 80s and 90s. We cannot allow that to happen.”
Darling received a polite if unconvincing smattering of applause, but by far the biggest cheers were given to delegates demanding he increase public sector pay.