Latest official figures show that inflation is expected to be higher in 1998 than the Treasury assumed in Labour’s first Budget last July.
In chancellor Gordon Brown’s pre-Budget statement in November, the forecast of inflation was revised upwards from 2.75% to 3%.
This means the Treasury now expects the headline rate (which includes mortgage interest payments) to be 4% or more in the coming spring.
Economic growth, meanwhile, is assumed to continue, but at a slower rate than the 4% level of 1997. The latest forecast is within a range of 2.5% to 2.75%, roughly the same as the 2.5% forecast in July last year.
Car workers’ pay settlements towards the end of last year were mostly above the 4% mark, with Ford’s revised offer in December for its 20,000 manual workers standing at 4.5% for year one, followed by a rise of half a percentage point above RPI the following year (or 4.25%, whichever is the higher).
Most manufacturers traded top-of-the-range pay rises for improvements in productivity.
Assembly line workers at Jaguar receive the highest level of basic pay. Toyota is bottom of the league table but its pay is only slightly below Ford’s.