UK unions start fight to renegotiate pay deals

By Matt Falloon

LONDON (Reuters) - Public sector workers are seeking to renegotiate higher pay deals with the embattled Labour government as the cost of living surges at its fastest pace in at least 11 years, union officials said on Wednesday.

The government, facing the risk of defeat in the next election due by May 2010, is already in dispute with hundreds of thousands of public sector workers over pay because of its policy of pegging deals to the two percent inflation target.

But with inflation leaping to 3.3 percent in May -- its highest since Labour came to power in 1997 -- anger among workers is growing and unions say they are attempting to invoke clauses in existing wage settlements to fight for more money.

The Bank of England says inflation could even spike temporarily above 4 percent this year, before cooling back to target as the economy cools and commodity prices stabilise.

However, with the public's perception of inflation at a record high, policymakers are concerned it could embolden employees to start demanding much higher wages -- triggering a hard-to-stop wage/price spiral.

"There are triggers for more pay talks which centre around the rate of inflation," Alex Flynn, spokesman for the Public and Commercial Services union, told Reuters on Wednesday.

He said the PCS is trying to reopen talks for about 80,000 workers at the Department for Work and Pensions. If successful, that could encourage hundreds of thousands of other public sector staff to do the same.

"People are seeing food prices rise, fuel prices rise and mortgage costs and every month seeing their pay packets become worth less and less," Flynn said.