Today’s labour market figures ought to bring good news: they show that growth on earnings has moderated to 5.4 per cent, the lowest level in two years. That should ease fears of inflation – it is growth in pay which has most concerned the Bank of England in recent months – and pave the way for further cuts in interest rates. The trouble is, though, that the Chancellor, Rachel Reeves, has undermined this by granting pay rises of 5.5 per cent to several million public sector workers – threatening to reignite wage growth again.
The public sector has become an inflationary engine chugging away in one corner of the economy
Indeed, there is little in today’s figures to show that public sector workers were getting a raw deal – a narrative spun by public sector unions. Over the past 12 months public sector pay growth, at 6 per cent, has outstripped that in the private sector, at 5.2
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