The British chancellor of the exchequer, Mr Gordon Brown, yesterday warned against an eruption of public sector pay claims as a result of higher government spending, and denied that UK entry into the euro was inevitable.
In a pugnacious performance at a bad-tempered meeting of the Commons Treasury select committee, the chancellor said the recent comprehensive spending review was not a signal for public sector unions to submit high pay claims.
Mr Brown said the situation had changed from the 1980s and 1990s, when erratic economic growth meant unions grabbed what they could when the economy was growing strongly.
"Public sector workers now realise there is no need to push for higher awards than the country can afford," he said.
He denied repeated claims from Conservative members of the committee that the planned rises in public spending would drive up interest rates.
Mr Brown cited comments by Sir Eddie George, governor of the Bank of England, that the overall spending increases first announced in the March budget added little to inflationary pressure.
"The Bank of England has had from March until July to look at the fiscal framework, and has not raised interest rates," he said.
Mr Brown also delivered an implied rebuke to Mr Robin Cook, the foreign secretary, who claimed earlier this month that it was inevitable the UK would join the euro.
"If the tests have to be met and the people make a decision, it is hardly a foregone conclusion," said Mr Brown.
The chancellor added that Mr Cook's speech on that occasion had contained no reference to the inevitability of Britain's euro membership, a sideways dig at the foreign secretary, who made the remarks in unscripted comments after the speech.
Meanwhile, the euro rallied across the board yesterday setting two- and three-week peaks against the dollar and the yen respectively and overshadowing an earlier yen fall to two-month troughs against the US currency.
Analysts said the market took slightly-higher-than expected rates at the European Central Bank's weekly refi auction as an excuse to push the euro higher but stressed the auction results should do little to alter euro zone interest rate expectations.
