Boris Johnson warns of ‘wage-price spiral’ if workers demand higher pay
Boris Johnson has raised the spectre of a 1970s-style “wage-price spiral” that could force the Bank of England to push up interest rates dramatically, if workers demand to be compensated for rocketing prices.
The prime minister vowed to tackle low growth and the cost of living crisis but said the government would put a new focus on the cost of housing, including extending the right to buy and a comprehensive overview of mortgage products aiming to radically increase the number of 95% mortgages on offer.
As rail workers prepare to go on strike later this month, and with inflation running at 9%, Johnson claimed that if wages continued to chase prices upwards it could unleash an economic crisis.
“When a wage-price spiral begins, there is only one cure and that is to slam the brakes on rising prices with higher interest rates,” he said, speaking at a college in Blackpool.
In a wide-ranging speech about the economy, the prime minister acknowledged that the UK would be “steering into the wind” in the coming months, as he blamed “global pressures”, including the war in Ukraine, for soaring inflation and weak GDP growth.
The prime minister said the government should reject what he called the “Covid mindset” that more state spending was the answer to every problem, and instead focus on cutting regulation to unleash growth.
He pointed to the impact of the Russian invasion in Ukraine as he said the cost of living crisis was likely to continue.
“Everyone can see and feel the impact on household budgets: the increases in the cost of food, the spooling digits on the petrol pumps, energy bills growing seemingly ever larger,” the prime minister said.
“The price of oil and gas looks likely to remain high and the same goes for grain and feed and
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