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Latest NewsEconomics, government & businessInflationPay & benefitsLiving Wage

Rising inflation prompts calls for action on pay

by Jo Faragher 15 Dec 2021
by Jo Faragher 15 Dec 2021 Inflation will mean many households struggle with rising costs
Shutterstock
Inflation will mean many households struggle with rising costs
Shutterstock

Inflation shot up to 5.1% in the year to November, leading to calls from unions and other bodies for greater wage protection of lower-paid workers.

The consumer price index (CPI) measure of the cost of living had already risen to 4.2% in the year to October. Economists had not expected the rate to hit 5% until Spring 2022.

The Office for National Statistics said rising transport and energy costs had driven the rise.

The 5.1% figure is twice the Bank of England’s target rate and could lead to a rise in interest rates, which will further affect household payments such as mortgages.

The International Monetary Fund has predicted inflation could hit 5.5% early next year, which would make it the highest rate in 30 years.

The TUC called for an “urgent plan” from the government to get real wages rising.

Pay

Pay awards set to reach 2.5% by next September

Starting salaries increase at fastest rate in 24 years

General secretary Frances O’Grady said that many households were facing the “most difficult Christmas in nearly a decade”.

“Many families will struggle to keep up with basic living costs, let alone Christmas celebrations. Fuel and electricity costs are soaring, and the Chancellor’s cut to universal credit could not have come at a worse time.

She called for the government to grant greater access to workplaces for trade unions so they could negotiate improved pay.

“The chancellor must fully fund real pay rises for public sector workers. And the minimum wage should go up to £10 immediately,” she added.

The national living wage is set to increase by 6.5% from £8.91 to £9.50 in April 2022, but there will also be an increase in national insurance contributions and a 1.25 percentage point increase on the dividend tax rate.

Liberal Democrat treasury spokesperson Christine Jardine MP said families faced a “perfect storm” this winter thanks to the pandemic and soaring inflation.

“Boris Johnson cannot stand idly by while the cost of living crisis forces people to choose between eating and heating.

“The Conservatives must offer hope to families this Christmas, starting by scrapping their unfair and manifesto-breaking tax rise coming in next year.

“We also need an urgent package of support for cafés, pubs and restaurants on the brink before more livelihoods are lost.”

Earlier this month, the Treasury submitted a report to public sector pay review bodies urging them not to base pay rises on inflation so they could continue to be affordable.

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Analysis by XpertHR recently predicted that the average pay settlement in the private sector will rise to 2.5% by next September – a rise that would likely be eroded by high inflation and increased energy and fuel prices.

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Jo Faragher

Jo Faragher has been an employment and business journalist for 20 years. She regularly contributes to Personnel Today and writes features for a number of national business and membership magazines. Jo is also the author of 'Good Work, Great Technology', published in 2022 by Clink Street Publishing, charting the relationship between effective workplace technology and productive and happy employees. She won the Willis Towers Watson HR journalist of the year award in 2015 and has been highly commended twice.

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