Payday mayday

All three political parties and all the bosses' organisations are uniting to ensure you won't get a pay rise this year. All of them are calling for pay freezes to differing extents: Labour, Conservative, Liberal Democrat, CBI, IoD, BCC.

The false divide created between public sector workers and private sector workers is nonsense. This is about making ordinary workers no matter which sector pay for the crisis. Meanwhile the bonus culture continues in the banking sector and the UK remains the most unequal its been for three generations.

Research published today by the Labour Research Department (LRD) shows that "a third of all pay deals now included a pay freeze - the largest proportion since the recession began".

This is very bad news. Inflation is currently 2.4%, expected to average over 3% this year and peak at over 4% in the summer. Therefore a pay freeze is a real terms pay cut. And as LEAP showed last year, in our Inflation Report 2009, inflation is often highest for the lowest paid.

The effect of the contraction in wages and rising unemployment last year is shown in the number of personal insolvencies, rising to 135,000 in 2009 - an increase of 26% on 2008.

Lewis Emery, LRD report author, says that "Maintaining jobs and business continuity is a greater concern, both in the private and public sectors, but with inflation at 2.4% pay will not be neglected either."

Unions and workers certainly cannot afford to ignore pay - especially for the lowest paid. And any Government wanting to address the crisis needs to move away from the rhetoric of pay freezes and start raising pay significantly to stimulate demand and avoid mass mortgage and loan defaults causing another bank collapse.

9 Feb Update: The Daily Telegraph reports that more than 1.4 million households were visited by bailiffs collecting unpaid council tax bills last year. This is a rise of 700,000 in just three years, and a 69% rise since 1997.