Pay freezes will have detrimental effect on economy, TUC leader warns

Freezing employees’ salaries will make the recession worse as it will discourage households from spending.

That is according to TUC general secretary Brendan Barber, who has said that many employees have already agreed to modest or no pay rises in a bid to save their jobs.

He warned, however, against "a generalised wage freeze across the economy", which he said "will make the downturn worse not better".

Commenting on the possible effects of a national wage freeze, Mr Barber said: "The last thing our precarious economy needs would be a further collapse in consumer confidence caused by a standstill in household budgets."

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He suggested that a wage freeze in the public sector was "particularly unjustified" as pay had "fallen behind" in recent years.

Office for National Statistics have shown that the Retail Prices Index (RPI) has fallen below zero and this period of deflation is set to create pay freezes for millions of public sector workers.