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Darling set to give City speech Darling calls for pay restraint
(20 minutes later)
Chancellor Alistair Darling is to discuss the state of the economy when he delivers his first Mansion House speech on Wednesday evening. Chancellor Alistair Darling has called for restraint in pay settlements in the public and private sector.
Speaking to the BBC, he said it would be "disastrous" if we "allowed inflation to take hold".
The chancellor was speaking a day after it was announced that the rate of consumer inflation was 3.3% in May, the highest level in 10 years.
The governor of the Bank of England has also warned inflation looks set to top 4% this year.
"We have got to be vigilant in relation to all pay settlements, public and private," Mr Darling told Radio 4's Today programme.
"If we get back into that [inflationary] spiral it will take years to get out of it," he said.
The chancellor is to discuss the state of the economy when he delivers his first Mansion House speech later.
In his address to the City of London, he is likely to discuss inflation, the cost of oil and house prices.In his address to the City of London, he is likely to discuss inflation, the cost of oil and house prices.
Mr Darling is also likely to address concern over changes to the tax system.Mr Darling is also likely to address concern over changes to the tax system.
His speech comes a day after it emerged that the rate of consumer inflation was 3.3% in May, and after the Bank of England warned it will probably hit 4%.
Pay 'restraint'
If inflation rises more than one percentage point above the government's 2% target, the Bank of England's governor must write a letter to the government to explain what action it is taking to control consumer prices.
In his letter to the chancellor, Mr King blamed sharp rises in the prices of food and energy for the increase in the rate of inflation.
In his reply, the chancellor wrote: "Continued restraint on pay is required from both the public and private sector.
"To return now to inflationary pay settlements would undermine rather than raise people's living standards with a damaging circle of wage increases eroded by steadily rising prices."
During his first delivery of the annual Mansion House speech, Mr Darling is likely to reiterate these sentiments.
It also seems likely that the chancellor will seek to improve the government's relationship with the financial sector, which has been damaged by confusion over changes to the taxation system and attempts to implement tighter regulation.