The government is facing fresh calls to help increase wages as inflation continues to rise at its fastest rate in 40 years.
According to the Office for National Statistics, the retail prices index (RPI), which is no longer an official statistic but is a measure which many trade unions base their pay negotiations on, rose to 11.7% from 11.1% last month. This is the highest it has been since the last quarter of 1981, when RPI hit 11.9%
The consumer prices index (CPI) measure of inflation hit 9.1% in the 12 months to May 2022 – its highest since March 1982. However, it had only grown marginally compared with the year to April 2022, when CPI was recorded at 9%.
The Bank of England has warned that CPI could reach 11% this year.
Workers’ wages are falling well behind inflation, with the average pay deal in the three months to the end of May 2022 reaching 4% – the highest level of pay growth in 30 years.
TUC general secretary Frances O’Grady said the government needed to stand up for working people, as inflation had risen twice as fast as average pay.
Pay and the cost of living
“Let’s be clear, inflation is not being driven by nurses and care workers wanting enough pay to keep food on the table without visiting a foodbank. And if the government does not do more to protect wages and spending, we are at growing risk of a recession that will devastate families and businesses,” she said.
“The government must defend wages with decent pay rises in the public sector and fair pay agreements in the private sector. And we need a long-term plan to make the UK more resilient, including a revival in UK manufacturing. This would protect us from future global shocks pushing up inflation.”
Yesterday, prime minister Boris Johnson said “too high” pay demands being made by unions including the RMT, which has organised a strike across the rail network on several days this week, would make it difficult to keep price rises in check.
Anna Leach, the CBI’s deputy chief economist, said the businesses that are most exposed to higher costs should expect “much pain” over the coming months.
She said: “The void left by falling household spending must be filled by government action to shore up both near and long-term economic growth. Committing to a permanent successor to the superdeduction, as well as supporting green infrastructure and technologies that help cut energy bills in homes and businesses, will both boost economic confidence and reduce exposure to volatile global energy prices.”