BANK of England Governor King’s insistence that nothing must be done to prevent the squeeze in living standards down to 1920s levels, has been met with strike warnings from trade union leaders.
King told assembled bankers and businessmen at the Civic Centre, Newcastle on Tuesday night, that pay rates have been ‘squeezed’ and it was his intention to squeeze them still further.
He said, ‘higher import and energy prices and taxes – have squeezed real take-home pay by around 12 per cent.
‘Average real take-home pay normally rises as productivity increases – money wages normally rise faster than prices.
‘But the opposite was true last year, so real wages fell sharply. . .
‘And given the rise in VAT and other price rises this year, real wages are likely to fall again.
‘As a result, in 2011 real wages are likely to be no higher than they were in 2005.
‘One has to go back to the 1920s to find a time when real wages fell over a period of six years. . .
‘Monetary policy cannot be based on wishful thinking.
‘So, unpleasant though it is, the Monetary Policy Committee neither can, nor should try to, prevent the squeeze in living standards, half of which is coming in the form of higher prices and half in earnings rising at a rate lower than normal. . .
‘Looking ahead, domestic spending still faces strong headwinds.
‘Private consumption, having fallen by nearly five per cent during the crisis, is likely to recover only slowly, restrained by the squeeze in real take-home pay and the rise in unemployment.’
Paul Kenny, General Secretary of the GMB, responded: The government’s strategy is a gamble without a plan B to adapt to the situation.
‘We are seeing, frankly, from areas of our membership, areas that have traditionally been very, very moderate and quiet; we are seeing calls for industrial action ballots.
‘We are seeing people very angry about the fact that there doesn’t seem to be a balance of justice in this.
‘They do not see that there is a strategy that says we are going to win this fight.
‘There’s a growing level of concern that there’s no light at the end of the tunnel. It’s all bad news.
‘People who have not had a pay rise for two or three years want to see Mervyn King do more about the “rampant, greedy nature” of the banking industry in the country.
‘This is a really important point for people in this country.
‘The government is deliberately creating unemployment.’
RMT General Secretary Bob Crow said there is ‘no question’ there will be co-ordinated action ‘when working people realise that their standards of living are going to be hammered into the ground as inflation lets rip.
‘It’s all very well for Mervyn King to tell us that him and his well-heeled banking mates are going to drag us back to the 1920s but he should also remember that that was the era of the general strike over just these kind of attacks on working people.’
Meanwhile, London Mayor Johnson called for a ban on the right to strike.
He told the London Assembly yesterday: ‘Clearly there are issues about strikes being called in a way that I think is vexatious and not in the interest of the wider union membership and that is something we are going to address.’