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Inflation figures bolster pay-freeze calls

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The latest inflation figures highlight the onset of public sector pay freezes, according to a key source of labour market information.

Office for National Statistics research shows the Government’s preferred Consumer Price Index remained unchanged on 1.8% between June and July.

Meanwhile, the Retail Price index eased from last month’s figure of -1.6% to -1.4%.

Charles Cotton, reward adviser at the Chartered Institute of Personnel and Development (CIPD), said the official figures were evidence that rising unemployment and spare capacity in the economy were spreading the “big pay chill” into the public sector.

“Today’s official figures confirm that inflation remains in negative territory, which will effectively mean a rise in workers’ real living standards even if you are subject to a pay freeze,” he said.

“However, this will be cold comfort for those who hoped the green shoots of economic recovery would signal the onset of a sunnier economic climate.”

The latest CIPD/KPMG Labour Market Outlook survey found that one in five public sector employers had frozen pay awards for the time being, mirroring the proportion in the private sector.

It is not surprising that employers are starting to squeeze the pay bill

Alan Downey, KPMG

The survey found that, on balance, employers expected the pay increases in 2010 to be lower than this year.

Alan Downey, head of public sector at KPMG, said the survey and inflation figures showed financial pressure was starting to build in the public sector.

“Salaries represent a sizeable proportion of total public expenditure, and it is not surprising that employers are starting to squeeze the pay bill,” he said.

“While public servants may not welcome this move, the good news is that it should reduce the number of job losses that will be required.”

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