Brown urges 'restraint' on pay

The chancellor warned civil service job cuts will go ahead

Gordon Brown has insisted he will "not tolerate" inflationary pay deals in either the private or public sector.

In a speech to the British Chambers of Commerce on Wednesday, the chancellor urged business leaders not to risk the UK's hard-won economic stability.

Mr Brown said there must be no return to the "bad old days of pay irresponsibility" prompted by signs of a global economic upturn.

He also warned civil service unions he plans to go ahead with 40,000 job cuts.

Earnings grow

"There must be no return to the bad old days of pay irresponsibility in the private sector and we will tolerate no irresponsibility in the public sector," said Mr Brown.

"Civil service unions should also know that not only will we proceed with the 40,500 job reductions in the Department for Work and Pensions, Inland Revenue and Customs, but there will be no going back to the old days of inflationary pay deals that would put hard-won economic gains in jobs, prosperity and stability at risk."

The chancellor's message follows the news last week that UK unemployment has fallen to its lowest level in decades.

The so-called ILO rate of unemployment, the government's preferred measure, now stands at 4.8%, its lowest level since records began in 1984.

However, average earnings grew by 4.9% in the year to February, up from January's revised figure of 4.7%.

With inflation at less than 2%, Mr Brown is keen not to see over-the-odds pay increases rock the boat.

Jobs migration

The chancellor's determination to press ahead with more than 40,000 job cuts across Whitehall - announced in March's budget - is intended to reduce administration costs by at least 5% by 2008.

Mr Brown also unveiled plans in the Budget to relocate 20,000 civil servants from London to the regions, saving an estimated £2bn over 15 years.

The job cuts were welcomed by the British Chambers of Commerce as reducing the burden through the tax system for business.