Chancellor Gordon Brown has pledged not to yield to pressures such as unaffordable pay demands that would "squander" the UK's hard won economic stability.

Mr Brown told the TUC Congress the Government had managed the fastest improvement on spending on health and education since the war and managed to keep inflation low by making tough, long-term decisions on the economy.

He told delegates in Brighton that half of Europe was now in recession, including Germany, Italy and Holland, which was putting pressure on the UK economy.

But he said the UK economy had continued to grow and had enjoyed the longest period of continuous and sustained recession-free growth for 50 years.

"Despite continuing global difficulties, Britain is today on track for stronger growth with low inflation," he said.

"We will not yield to any inflationary pressures, any unaffordable demands or any short-term quick fixes or soft options that would risk or squander the huge economic opportunities our new won and hard won stability offers the people."

The Chancellor won loud applause when he confirmed the national minimum wage will increase to £4.50 an hour from next month, £4.85 next year, subject to economic conditions, and would then rise above £5.

Mr Brown also revealed the Government would soon be reporting on some other "unfinished business", such as giving new rights at work for 16 and 17-year-olds.

He pointed out that three million jobs had been lost in the United States in the past three years and 1.4 million in Germany and Japan but in Britain an extra 1.6 million jobs had been created since Labour came to power in 1997.

Mr Brown, calling the union delegates "friends", said the Government had had the strength to take tough long-term decisions and not be diverted by the short-term.

He told the conference that Britain now had the lowest long time unemployment since 1976, more lone parents in work than ever and more people in work than at any time in the country's history.

But the Chancellor said the Government would not tolerate "waste" and said the thousands of public servants now being employed were not pen pushers but included 50,000 more nurses, 10,000 more doctors, 25,000 more teachers and 7,000 more police officers.

He admitted there were real issues which divided the Government and unions about the reform of public services but he appealed for all sides to work together to settle the problems.

Mr Brown made it clear the Government wanted to press ahead with modernising public services and bluntly told the conference there could be no return to inflationary pay rises or legislation from Europe that would risk jobs.

He added there would be no retreat from demanding efficiency and value for money as the Government moved to renew and reform every public service.

Wednesday September 10, 2003