THE Prime Minister Boris Johnson has warned of a “wage-price spiral” being caused if wages are increased in line with rising prices.

In his speech in Blackpool, he said “you can’t just spend your way out of” inflationary pressure and must be careful not to add to it.

The under-fire Prime Minister, who survived a no confidence vote on Monday despite 41 per cent of his MPs voting to sack him, was in the coastal Lancashire town to launch his new plan to allow people on benefits to get mortgages, which included a visit to Fylde College.

On pay rises, Johnson said: “We’re constrained in what we can do not just by the fiscal position, the risk of borrowing too much, but by the risk that we will fan the flames of further price increases,” he said.

“We can’t fix the increase in the cost of living just by increasing wages to match the surge in prices, I think it’s naturally a good thing for wages to go up as skills and productivity increase – that’s what we want to see.

Lancashire Telegraph: Boris Johnson is on the charm offensive after scraping through a no confidence vote. Pic: PABoris Johnson is on the charm offensive after scraping through a no confidence vote. Pic: PA

“But when a country faces an inflationary problem you can’t just pay more and spend more, you have to find ways of tackling the underlying causes of inflation. If wages continue to chase the increase in prices, then we risk a wage-price spiral such as this country experienced in the 1970s.”

He warned it could create “stagflation” of inflation combined with stagnant economic growth.

“When a wage-price spiral begins there is only one cure and that is to slam the brakes on rising prices with higher interest rates,” he said, but this has an impact on mortgages, rents and investment, growth and jobs.

The Prime Minister emphasised that the Government is “firmly on your side” in cutting living costs.

“This Government is firmly on your side in cutting those costs,” Boris Johnson said in a speech in Blackpool, telling the audience the Government was on the side of both British farmers and consumers.

He added: “We do not grow many olives in this country that I am aware of – why do we have a tariff of 93p per kilo of Turkish olive oil?

“Why do we have a tariff on bananas? This is a truly amazing and versatile country, but as far as I know we don’t grow many bananas, not even in Blackpool.

“We are on your side, we are on your side in tackling fuel bills, and not just with the cash help that I have set out just now.”

Lancashire Telegraph: The Prime Minister wants to help people on benefits get mortgages. Pic: PAThe Prime Minister wants to help people on benefits get mortgages. Pic: PA

On his plans to extend the right to buy to tenants of housing association homes, he said there are 2.5 million households whose homes belong to associations.

“They’re trapped, they can’t buy, they don’t have the security of ownership, they can’t treat their home as their own or make the improvements that they want”.

He said that some associations have treated tenants with “scandalous indifference”.

“So, it’s time for change. Over the coming months we will work with the sector to bring forward a new right-to-buy scheme,” he said.

Mr Johnson added that it would give “millions” more the chance to own their own home and would see “one-for-one replacement of each social housing property sold” while being affordable within existing spending plans.

“When (home) ownership remains beyond the reach of a great many hard-working people, it’s neither right nor fair to put ever vaster sums of taxpayers’ money straight into the pocket of landlords.”

“It’s time to put his huge wall of money – taxpayers’ money – to better use. It’s time to turn benefits to bricks.

“We are going to look to change the rules on welfare so that the 1.5 million working people who are in receipt of housing benefits – I stress working people – and who want to buy their first home will be given a new choice: to spend their benefit on rent, as now, or put it towards a first-ever mortgage.”

However, housing policy expert Toby Lloyd has said the Government’s extension of the right-to-buy scheme is unlikely to have much impact for the low-earning people it intends to benefit.

Mr Lloyd, who was former prime minister Theresa May’s housing adviser, said: “Clearly there are imperfections in the way that the mortgage market works at the moment, but fundamentally the problem is that house prices are way too high.

“That’s why there’s an affordability crisis.”

When asked whether the Government’s new housing plan would have much effect, he said: “I’d be very surprised if it happens in anything like the scale they expect, and if it does I don’t expect it to have that much impact.”