Gordon Brown calls for public sector pay restraint to keep inflation down

Brown praises Labour’s fiscal prudence

Brown praises Labour’s fiscal prudence

Gordon Brown today issued a strong defence of his handling of the economy, and underlined his tough line by calling yet again for restraint in public sector pay rises.

In his first public statement since the birth of his child in July, the chancellor praised the UK economy for withstanding “turbulent months” in which rising oil prices have threatened growth, with the knock-on effect of raising gas, electricity and utility bills.

A recent ICM/Guardian poll revealed that just 37 per cent of voters give Mr Brown credit for the state of the UK economy since 1997, and just 49 per cent said it was Labour’s policies that created stability – 41 per cent said they had made little difference.

But writing in the Financial Times today, the chancellor said Labour had taken the “tough decisions” necessary for economic stability, both at home and in leading the debate against protectionism abroad – and said this was what he wanted be judged on.

“In every other decade, an oil shock by itself would have threatened a return of the traditional British ‘stop-go’,” he wrote.

“But once again our economy is demonstrating the resilience that has given us the longest period of unbroken growth and stability in our history.”

Mr Brown noted that the Bank of England’s “forward-looking and pre-emptive” decision to raise interest rates had anticipated the effects of strengthening growth and was working to keep inflation stable.

But he warned: “We will need this strengthened British resilience to face tough times ahead. Global risks remain and the world economy faces an uncertain autumn.”

A key part of this resilience, the chancellor insisted, was keeping public sector pay increases down. Last year these averaged 2.5 per cent, but in the face of union opposition, he is demanding even tougher limits for the coming year.

“I have told every department to go further and found all pay settlements on achieving our two per cent inflation target,” he wrote today.

“Toughness on pay is just part of a public sector reform programme, to release resources for national priorities, that also includes an 80,000 reduction in the civil service, £30 billion of asset sales by 2010 and more stretching efficiency targets.

“The same strength to make the right long-term choices for Britain requires us to resist easy options and at all times, Budget by Budget, strike the right balance between keeping tax low and meeting the needs of public investment and stability.”

Mr Brown also stressed that progress in world trade talks was vital to Britain’s economic stability, saying the failure to achieve agreement in the Doha round was “one of the summer’s most ominous setbacks”.

“We must all wake up to the reality that, without the forward momentum a new trade agreement would give, we risk rolling backwards to the age of beggar-thy-neighbour protectionism and the further threats to stability that would flow from it,” he wrote.