Calls have been made for 2% pay rise ceiling to be lifted

A Labour MP has backed union calls for Gordon Brown to lift his 2% target for public sector pay rises in the wake of the warning from Bank of England Governor Mervyn King that inflation could spike as high as 3.7% this year.

Public sector union Unison announced on Thursday that it will ballot members in local government on a series of strikes starting in July, raising the prospect of a "summer of discontent".

Downing Street said the Prime Minister was determined to maintain discipline in public sector pay in order to keep a lid on inflation and give the Bank's Monetary Policy Committee greater leeway to cut interest rates.

Binmen, social workers and town hall staff could be among Unison members taking part in campaign of escalating action over a 2.45% pay offer, starting with a two-day strike in July and moving on to longer stoppages over the summer.

The union's national secretary for local government Heather Wakefield said Mr King's warning was "quite devastating news" for low-paid council workers.

"I think now that we are facing a very difficult position unless the Government reviews its position," she told BBC Radio 4's World at One.

"I think it would be justified in reviewing the position in the light of current inflation rates and what the Governor of the Bank of England has said, and I think they need to very think seriously about that."

The union was backed by Labour MP Ian Davidson, who said that trying to maintain the ceiling on pay increases would cause the Government "major difficulties".

He told the programme: "We can hardly expect the low-paid in public services to cheerfully accept a cut in their standard of living, which is what would be meant by a 2% increase at a time when inflation is running at 3%."

While senior council staff, who enjoy large pay packets and generous pension provision, may be able to absorb a below-inflation rise, those at the bottom can ill afford it at a time when food and fuel prices are soaring, said the Glasgow South-West MP.