Tim Besley, a member of the Bank of England's Monetary Policy Committee, claimed last week that inflation will fall next year if workers keep their wages down.
He pronounced, 'Our job is to fight inflation because that's the best basis for the economy to grow, create jobs and allow living standards to rise.
'Everyone wants to protect their living standard. But if everyone does it, prices will just go up again as businesses try to cover their higher costs. Then we'll all be back to square one, but with inflation still high.'
At the most straightforward level this is a ridiculous argument – workers have no choice but to fight for pay. The average household's disposable income has fallen for the first time since 1997, by 15 percent to £14,520.
Rising bills mean households have to find £145 extra a month. Disposable income now represents just 28 percent of gross household income, compared to 35 percent a year ago.
The reality is that wage rises are falling behind inflation, rather than pushing it up. While the government's preferred estimate of inflation – CPI – is 4.4 percent and the unions' preferred measure – RPI – is 5 percent, the average rate of pay rises across the country was 3.5 percent in the three months to June.
Public sector workers are under attack from Gordon Brown's policy of pay restraint, and only got 2.7 percent pay rises. There were increases of 3.5 percent in private services and 4 percent in manufacturing.
But there is a growing revolt in the public and private sectors. Council workers in the Unison, GMB and Unite unions across Scotland struck determinedly on Wednesday of last week. They brought services in the country to a halt. Bus workers in London are set to strike on Friday of this week for decent pay.
There has been coordinated action in parts of the public sector. In April, members of the NUT teachers' union in England and Wales struck alongside members of the UCU lecturers' union in further education and 100,000 civil service workers in the PCS union.
Unison and Unite members in English, Welsh and Northern Irish local government struck for two days in July, along with a selection of PCS members.
And the growing anger should lead to further escalation in the autumn with various unions preparing to take action.
More strikes, coordinated across the unions and with a higher intensity are needed to win. It is not guaranteed that rising prices automatically lead to sharp class struggle. This also depends on the confidence of workers and their leadership.
The union leaders are squeezed by pressure from the government and bosses on one side and pressure from their members on the other.
There have been increasing moves towards fights over pay in the private sector, with a larger number of pay offers being rejected.
But in a number of wage disputes the union leaderships have been keen to settle at the first new offer from management, regardless of whether it meant decent pay or not for their members.
The union leaders are always keen on settling disputes as quickly as possible unless there is pressure on them from below.
However, there is an added political pressure – heightened in the public sector. This is the union leaders' support for the Labour government.
It is Labour that has politicised the fight over pay with its determination to keep wages down. Gordon Brown has been clear, saying 'All workers should look at pay settlements as a means by which we can conquer inflation.'
Instead of seeing Brown's growing crisis as an opportunity to win wage rises for their members, some union leaders seem keen to accept anything to avoid further embarrassing Labour.
At the Warwick negotiations last month, the unions put in weak demands in return for their funding of the Labour Party. But even these were rejected.
The determination to avoid tackling Labour has meant that the union leaders insist that it is the Tory councils that are the problem in the local government dispute in England and Wales.
In Scotland they blame the Scottish National Party government, not the Westminster one or Labour-controlled councils.
There is now an attempt to move to limited sectional strikes or working to rule instead of escalating the fightback with more coordinated action.
Activists need to oppose this and fight to make the united action over pay – agreed by all the unions and the TUC – a reality. A concerted fight against Brown's pay curbs can increase people's confidence and win.
We need to unite at a political level as well. As part of this process trade union activists and other campaigners have launched the People Before Profit Charter. The charter's ten points put forward proposals on a number of issues that would improve the lives of millions of people.
These include decent pay rises, taxing corporations, improving workers' rights, opposing privatisation, building council homes, opposing racism and war, improving pensions and abolishing tuition fees.
Using the charter as a way of encouraging discussion and helping provide a pole of attraction focused on workers' rights, rather than the interests of Labour ministers can only help to fuel the pay revolt.
The recession: What does it mean for us?
A briefing for trade unionists with Paul Mason, economics editor of Newsnight, in discussion with Graham Turner of GFC Economics and author of the book The Credit Crunch
Tuesday 2 September, 6.30pm, Friends Meeting House, Euston Road, London (opposite Euston station)
Discussion hosted by the People Before Profit Charter. For more information go to » peoplebeforeprofit.wordpress.com