Rishi Sunak says public sector pay rises will fuel inflation. Economists say they won’t

Published

3 years ago

January 4, 2023

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Rishi Sunak has said he cannot raise public sector wages because doing so will fuel inflation.

The government has warned of a “wage-price spiral”, also known as wage-push inflation, in which prices rise (inflation) due to higher wages which, in turn, increase prices in a perpetual loop.

As more workers go on strike this month demanding their pay matches or beats inflation – which stands at 10.7% – two economics experts have told Sky News the government is not correct in its assessment.

They agreed increasing public sector wages would not push up inflation.

Dr Ethan Ilzetzki
Associate professor of economics, London School of Economics

“It’s very wrong-minded of the government to approach it in this way,” Dr Ilzetzki said.

“Private sector wages do feed into inflation – wages increase, costs increase and they want to pass that on to the consumer.

“So private sector wages are more likely to lead to inflation or a wage-price spiral but there’s no similar way that the public sector could cause inflation.

“The caveat is, of course, an increase in public expenditure could lead to inflation and public wages are one way public expenditure is increased, but the government could increase wages and cut other parts of the budget.”

He said the conflict between the government and public sector workers is essentially political and about “who burdens the cost”.

The Bank of England’s job is to keep inflation close to 2%, he added, so “the first order of business is to bring inflation down” to that figure.

“The Bank of England always has the ability to bring inflation down, even if its caused by global energy prices or geopolitical conflict,” Dr Ilzetzki said.

“That does have a cost: the further slowing down of the economy which has already plummeted, so the Bank of England does have an unenviable task but it has a very clear mandate to keep prices at a constant level.”

He added that the friction between the unions and the government is “about taking responsibility for economic problems” that politicians “need to address”.

Professor Alex Bryson
Professor of quantitative social science, University College London

“The government’s concern with wage-push inflation is misconceived as they’re missing much of the bigger picture: unemployment and shrinking of the size of the economy,” Prof Bryson said.

“Past periods of recession inflation were often followed by deflation – this happened in 2008.

“But this episode is different, the chief reason [for inflation rising] was not wage-push but COVID-induced restraints, which hike prices but will die back over time, as well as energy prices and ongoing uncertainty over Ukraine.”

He said unemployment rates have been low for a long time and wages have been relatively stagnant, which has meant workers’ arguing power is “not so great”.

“There are more benefits for the government paying public sector workers more than not, it’s conceivable they could benefit from an increased low turnover, which would cost the public less than it does now,” he said.

“Even a substantial pay rise will not see public sector workers catching up on the pay gap with the private sector that has been widening since 2010.”

Prof Bryson said he thinks the UK is already in recession and it will be “long and deep”.

“We’re seeing a deeper recession than is currently identified, we saw that before with the great recession of 2008 so you would expect that would normally mean a spike in unemployment,” he said.

“Surveys in recent months show an increased proportion of indexes in the labour market saying unemployment will rise in the next 12 months.

“That will mean GDP is lower than it currently is which will mean inflation will start to fall.”

He added that at the moment, the government should be more worried about high non-employment – those not in work and not seeking work – and underemployment – those who want to work more hours but do not have the opportunity to.

“Their focus should be on reducing the rate at which real wages are falling,” Prof Bryson said.

“It’s not clear to me whether the government will be able to hold their line on wage-push inflation, especially if the unions are holding out as they seem to be.”

World

Tomorrowland: ‘Devastating’ blaze destroys main stage at major festival – two days before it was due to begin

Published

3 hours ago

July 17, 2025

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Tomorrowland: 'Devastating' blaze destroys main stage at major festival - two days before it was due to begin

A huge fire has destroyed the main stage of a major festival in Belgium – two days before it was due to begin.

Tomorrowland is a dance music event as big as Glastonbury – and David Guetta was due to perform.

Footage showed flames and thick plumes of black smoke engulfing the stage and spreading to nearby woodland on Wednesday.

The annual festival in the town of Boom, north of Brussels, is one of the biggest in Europe and attracts about 400,000 people over two consecutive weekends.

It is famous for its immersive and elaborate designs and attracts big names within dance music – including Guetta, best known for tracks When Love Takes Over and Titanium.

Dutch DJs Martin Garrix and Charlotte de Witte were also due to perform, along with the likes of Swedish House Mafia, Eric Prydz and Alok.

The festival’s website described the creative elements which went into the elaborate main stage.

The theme, described as Orbyz, was “set in a magical universe made entirely out of ice” and “full of mythical creatures”.

Organisers said no one was injured in the blaze but confirmed “our beloved main stage has been severely damaged”, adding they were “devastated”.

Spokesperson Debby Wilmsen added: “We received some truly terrible news today. A fire broke out on the Tomorrowland site … and our main stage was essentially destroyed there, which is truly awful.

“That’s a stage that took years to build, with so much love and passion. So I think a lot of people are devastated.”

Despite the fire, Tomorrowland organisers said they were still expecting 38,000 festivalgoers at DreamVille, the event’s campsite.

World

Israel attacks Syrian military HQ – and disrupts live TV broadcast

Published

12 hours ago

July 16, 2025

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Israel attacks Syrian military HQ - and disrupts live TV broadcast

Israeli airstrikes have targeted the Syrian military headquarters in Damascus amid renewed clashes in the country.

The gate of the Ministry of Defence in the Syrian capital was targeted by two warning missiles from an Israeli reconnaissance aircraft.

State-owned Elekhbariya TV said the Israeli strike had wounded two civilians, the Reuters news agency reported.

It came as Israeli airstrikes targeted security and army vehicles in the southern city of Sweida, where the Druze faith is one of the major religious groups – marking the third consecutive day Israel has struck Syrian forces.

The Israeli military confirmed it had “struck the entrance gate” in Damascus – and that it would be monitoring “actions being taken against Druze civilians in southern Syria”.

Why Israel is getting involved in Syria’s internal fighting

Dominic Waghorn

International affairs editor

@DominicWaghorn

Israel has shown little respect for international borders since becoming the unrivalled military hegemon of the Middle East. Today that meant an Israeli airstrike on a government building in Damascus.

Israel says its attack on a Syrian defence ministry facility was intended as a warning to the new government: stay out of the part of southern Syria we have occupied or else.

Israel has moved into parts of the south of the country, built military bases and declared a line of control.

On Monday, Syrian tanks heading south to try and restore order following an outbreak of factional fighting were attacked by Israeli warplanes.

“The presence of such vehicles in southern Syria could pose a threat to Israel,” stated the Israel Defence Forces.

In reality, Syria’s ageing tanks pose minimal threat to Israel’s state-of-the art military.

Read the full analysis

Local media said Sweida and nearby villages were coming under heavy artillery and mortar fire on Wednesday, according to Reuters.

The clashes marked the collapse of a ceasefire between Syrian government forces and Druze armed groups, with Israel also warning it would increase its involvement.

Israel said it was acting to protect the Druze groups through its attacks on convoys of Syrian forces.

Syria blamed militias in Sweida for violating a ceasefire agreement which had only been reached on Tuesday.

A statement from its defence ministry said: “Military forces continue to respond to the source of fire inside the city of Sweida, while adhering to rules of engagement to protect residents, prevent harm, and ensure the safe return of those who left the city back to their homes.”

Israel’s defence minister Israel Katz said the military will continue to strike Syrian forces until they withdraw and should “leave Druze alone”, according to local reports.

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Why Israel is getting involved in Syria’s internal fighting

Published

12 hours ago

July 16, 2025

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Why Israel is getting involved in Syria's internal fighting

Israel says its attack on a Syrian defence ministry facility was intended as a warning to the new government: stay out of the part of southern Syria we have occupied or else.

Israel has moved into parts of the south of the country, built military bases and declared a line of control.

On Monday, Syrian tanks heading south to try and restore order following an outbreak of factional fighting were attacked by Israeli warplanes.

“The presence of such vehicles in southern Syria could pose a threat to Israel,” stated the Israel Defence Forces.

In reality, Syria’s ageing tanks pose minimal threat to Israel’s state-of-the art military.

The Syrian armour was attacked as it entered the area around Sweida in the Druze heartland of southern Syria following factional fighting there.

The flare-up reportedly began with clashes between Bedouin and Druze groups that ended in scores killed.

The background to the escalation is complicated.

At least three Druze militia groups are divided in their loyalties to different religious leaders and differ over how they should respond to calls to assimilate into the new post-revolutionary Syria.

Israel is becoming more and more involved in Syria’s internecine war and says it will remain there indefinitely “to protect our communities and thwart any threat”.

Its critics say Israel is operating a policy of divide and rule in Syria, weakening the fledgling government and creating a buffer zone to protect the border with the Golan Heights – originally Syrian territory that it has occupied and annexed for almost half a century.

Since the fall of the Assad regime, Israel has used airstrikes to destroy of much of Syria’s military capability weakening its ability to impose control on outlying regions. This makes it more not less likely Israel will have a volatile unstable state on its northern border.

America and European powers have chosen to normalise relations with the new government in Damascus and lift sanctions.

In contrast Israel has occupied its territory, bombed its military and today hit one of its government buildings in the capital with an airstrike.

Since its crushing military campaigns against Hamas, Hezbollah and Iran, Israel has emerged as the unchallenged military power of the region.

There is however a limit to what blunt force can achieve alone. It requires diplomacy to achieve lasting gains and Israel’s repeated assaults on multiple neighbours combined with its relentless campaign in Gaza are winning it few friends in the region.