Darling warns of tough times ahead

Huddersfield Daily Examiner (Huddersfield, England), June 19, 2008

CHANCELLOR Alistair Darling has renewed calls for pay restraint in the public and private sectors to head off the danger of an inflationary spiral.

In his high-profile Mansion House speech last night Mr Darling acknowledged that "times are tough", but insisted the UK would avoid recession.

He told his audience of City financiers: "Our economy will continue to grow."

The Chancellor also confirmed plans to strengthen the regulation of financial services in the wake of the collapse of Northern Rock, including giving the Bank of England a new legal responsibility for financial stability.

A new Financial Stability Committee, including members drawn from outside the Bank, will sit alongside the Bank's Monetary Policy Committee, which sets interest rates.

Mr Darling's first Mansion House speech came against a backdrop of intense pressure over inflation and pay, with No 10 signalling that it would resist any effort by public sector unions to renegotiate three-year pay deals in the light of rising prices.

On Tuesday, the Governor of the Bank of England, Mervyn King, was forced to send a letter to Mr Darling explaining why inflation, at 3.3%, had risen more than 1% over target.

CAPTION(S):

GROWTH PROMISE: Alistair Darling addresses City financiers last night