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Andrew Bailey faces Bank of England mutiny over staff pay rise

·3-min read
Andrew Bailey Bank of England inflation - ANDY RAIN/EPA-EFE/Shutterstock/Shutterstock
Andrew Bailey Bank of England inflation - ANDY RAIN/EPA-EFE/Shutterstock/Shutterstock

Staff at the Bank of England are to demand a major pay rise in the face of surging inflation, despite pleas for restraint on wages from their own Governor.

The trade union Unite is consulting staff on Threadneedle Street this summer about securing a “decent pay rise” to cushion the blow of soaring living costs. Staff received just a 1.5pc increase this year, far below the 9.1pc rate of inflation reached in May.

Mutiny at the Bank of England over pay would prove deeply embarrassing for Andrew Bailey, the Governor, after he urged UK workers not to demand large wage increases in remarks criticised by unions and politicians. The Bank’s policymakers fear that a surge in pay packets will fuel a wage-price spiral that prolongs painfully high inflation.

Unite, which has 600 members at the Bank, said this year’s pay deal was agreed “before inflation started to soar” but that it will demand a bigger boost to help with the living costs crunch.

Steve O’Donnell, Unite regional officer, said: “When we start the next pay round in the autumn, our members’ claim will reflect the need for a decent pay rise to reflect the current cost of living crisis. We will be consulting our members on the claim this summer.”

The union refused to be drawn on how big an increase it will ask for but did not rule out demanding an inflation-matching raise.

The Bank expects inflation to rocket to above 11pc by October, around when a pay deal for its staff will be hashed out. The row comes amid a summer of industrial strife as unions demand higher pay to compensate for the surge in living costs.

The Bank’s annual report last week revealed that Mr Bailey turned down a pay rise this year after being offered a 1pc increase.

Mr Bailey has faced fierce criticism for calling for restraint while taking a total pay package including pension benefits of almost £600,000.

In February, the Governor said: “I’m not saying nobody gets a pay rise, don’t get me wrong, but I think, what I am saying, is we do need to see restraint in pay bargaining otherwise it will get out of control.”

Downing Street was quick to slap down the Governor’s remarks but Mr Bailey repeated the plea later in May. He said workers, particularly higher earners, should “think and reflect on asking for high wage increases”.

The Treasury minister Simon Clarke has since himself warned that workers should avoid “unrealistic expectations around pay”.

Speaking earlier this month, he said: “We have to be very careful at this point about preventing inflation from becoming a self-fulfilling prophecy."

Some economists fear that the UK is in early stages of a dreaded wage-price spiral that means high inflation will persist after the initial shocks of the war in Ukraine and post-Covid reopening have faded.

Under such a spiral, fast-rising prices stoke demands for big pay rises but businesses then pass the cost of higher wages on to consumers. An ultra-tight jobs market is also putting upward pressure on pay as firms scramble to fill a record 1.3m vacancies.

The Government has come under fire for reinstating the pension triple lock, which means retired people will get an inflation matching increase in their income at the same time as workers suffer a real-terms pay cut.

While many of the top appointments on Threadneedle Street, such as the Governor and rate-setters, are made by the Treasury, pay is set by the Bank.

The Bank of England declined to comment.

At the weekend, the world’s top central bank warned that the global economy has reached a “tipping point” where it may be impossible to stop runaway inflation.

The Bank for International Settlements (BIS) used its annual report to call for more efforts to step up efforts to tackle soaring prices.

Agustín Carstens, general manager of the BIS, said: “The key for central banks is to act quickly and decisively before inflation becomes entrenched.”

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