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BROWN URGES PUBLIC SECTOR PAY RESTRAINT

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The chancellor has urged the capping of salary increases at two per cent over the next five years....
The chancellor has urged the capping of salary increases at two per cent over the next five years.

In a letter to the public sector pay review body's chairman, Gordon Brown says:

'In recent months, goods price inflation has picked up as a result of temporary price increases. This means it is important to remain vigilant to the risk of higher pay settlements feeding through into higher inflation going forwards.

'It will be important to ensure that public sector pay increases do not contribute to inflationary pressures in the economy going forwards. To do so would risk converting a temporary increase in inflation into a permanent increase. The pay review bodies should therefore continue to base their settlements on the achievement of the inflation target of two per cent.'

Mr Brown included supporting evidence on the state of the economy and inflationary pressures such as the price of oil in a bid to persuade the body to toe the line.

Pay review bodies are independent and are responsible for recommending annual pay increases for around 40% of the public sector work force, including teachers, doctors, dentists, nurses, the armed forces and the Senior Civil Service.

Mr Brown revealed his recommendation at the end of Treasury questions in the House of Commons, prompting opposition claims that he was burying the news 'with a whimper' rather than making a full statement.

The chancellor's statement and the House of Commons debate can be read on the Hansard website.

The Treasury document, Releasing the resources to meet the challenges ahead: value for money in the 2007 Comprehensive Spending Review, can be read as a pdf by clicking here.

The chancellor's letter to the public sector pay review body can be read as a pdf by clicking here.

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