UK Prime Minister Rishi Sunak has advised employers to only grant pay raises to workers as a direct result of their success, in an effort to combat inflation. Sunak insists that salary increases should only be given to employees who meet their targets, rather than merely spending money without generating results.
Inflation Cools to Lowest Level in 30 Years
Inflation has dropped to 6.8% in the 12 months leading up to July, down from 7.9% – the largest decrease in three decades. Sunak sees this as a positive development in his efforts to tackle inflation in the country.
Rewarding Productivity Increases is Key
While Sunak acknowledges that it is not the government's place to interfere in the pay decisions made between companies and their employees, he emphasizes the importance of sustainable pay raises that are tied to productivity increases. He believes that a growing economy with rising productivity is the key to long-term pay increases for the workforce.
Speaking to ITV News, Sunak said, "I want people to be paid more, but that means we have to have a growing economy where productivity is rising. That's how you have sustainable long-term increases in people's pay packets."
Inflation Target at Risk
Despite the drop in inflation, experts fear that Sunak's target of 5.3% by the end of December may be in jeopardy. Pay growth remains high and core inflation, which excludes energy and food, remains unchanged at 6.9%. Heidi Karjalainen, of the Institute for Fiscal Studies, states that the high rate of inflation for goods and services other than food and energy challenges the Prime Minister's target.
Potential Summer Spike
Inflation is projected to rise over the summer, driven by increased wages and the higher cost of clothing. This puts pressure on the Bank of England to raise interest rates as early as next month.
Economic Concern Shifts to Risk of Recession
George Bibb, head of the IPPR's centre for economic justice, warns that the risk of a recession may soon overshadow concerns about rising prices. This adds to the urgency of addressing inflation and ensuring sustainable economic growth.
