Twin threat to Darling's appeal for pay restraint

Alistair's Darling's desperate plea for pay restraint was today undermined by the twin threat of inflation-busting wage rises and looming strikes.

The Chancellor has warned of a damaging spiral of inflation hitting Britain if millions of people do not accept below-inflation increases this year.

But a series of above-inflation rises raised fears that some firms are turning a deaf ear to the Government's appeal to keep down wages as petrol, food and energy prices soar.

Meanwhile, union bosses are today set to announce the result of a ballot which could see more than 800,000 council workers, ranging from school dinner ladies, refuse collectors and classroom assistants to architects, going on strike in what threatens to be a summer of discontent.

Nearly 300,000 civil servants are also considering industrial action amid growing anger at pay rises failing to keep up with the soaring cost of living.

Mr Darling is urging tight pay deals from the "boardroom to the shop floor".

"We've got to make sure that we keep inflation under control because if we don't, what will happen is that people may get a pay increase but every penny of it will be eaten up by rising prices in the shops," he said.

But hundreds of tanker drivers supplying Shell petrol stations last week clinched a 14 per cent rise in a two-year deal after going on strike.

Inflation is running at 3.3 per cent, according to the Government's preferred measurement, the Consumer Prices Index. However, many pay deals are linked to the Retail Prices Index, which includes mortgage interest payments, which is currently 4.3 per cent and has been higher.

The highest pay awards in the three months to April were in energy, water, engineering and chemicals companies, according to IDS Pay Databank.

"The main reason they are now settling so high is because many are part of long-term deals, which means that in the second or third stage of these deals RPI is being used to work out the settlement," said Lois Wiggins, of IDS.

Other firms are having to give their employees "kicker" payments as they agreed multi-year deals when inflation was expected to stay subdued.

Unison, the country's biggest union, was today due to announce the result of a strike ballot after hundreds of thousands of town hall workers rejected a 2.45 per cent pay rise. Heather Wakefield, the union's head of local government, said: "The offer is simply not enough to help our members cope with the huge rises in the cost of food, fuel and housing," she said.

Employers have made it clear the 2.45 per cent is the final offer and have warned that jobs and services will be affected if it is increased.

Prime Minister Gordon Brown has also ordered ministers to give up their 1.5 per cent pay rise this year, but unions argue that business chiefs are still getting big awards.

"Ministers have been silent as boardroom pay has run riot," said Derek Simpson, of Unite. "Why should those with the least have to tighten their belts first?"