People 'need to accept' they are poorer, says Bank of England economist

ITV News Economics and Business Editor Joel Hills reports after a Bank of England boss said the UK 'need to accept' they are poorer

People in the UK 'need to accept' they are poorer otherwise inflation will continue to climb, the chief economist at the Bank of England has said.

Huw Pill said that people and businesses have responded to higher bills and costs by asking for higher wages or charging their customers more money.

But this, he said, adds to inflation, pushing up prices even further across the economy.

UK inflation, the rate at which prices rise, was at 10.1% in March. The rate dipped from 10.4% the previous month, but this does not mean prices are falling, just that they are rising at a slower rate.

Speaking on the Beyond Unprecedented podcast from Columbia Law School, Mr Pill said: “The UK, which is a big net importer of natural gas, is facing a situation where the price of what you’re buying from the rest of the world has gone up a lot, relative to the price of what you’re selling to the rest of the world, which is mainly services in the case of the UK.

“You don’t need to be much of an economist to realise that if what you’re buying has gone up a lot relative to what you’re selling, you’re going to be worse off."

Mr Pill joined the Bank of England in September 2021 and was paid a salary of £88,154 and benefits of £7,029 during his first six months at the organisation, according to the central bank’s annual report, taking his annual salary to £180,000.

According to the Office of National Statistics, the median average disposable income in the UK was £32,300.

As energy prices and food costs continue to rise, many workers have asked for pay rises to help ease pressure on household budgets.

Supermarkets are under pressure to help customers, but deny they are making huge profits out of the cost of living crisis. Credit: PA

And, although pay is going up, it is not matched by inflation, meaning people's pockets are still worse off.

Mr Pill added: “So, somehow in the UK, someone needs to accept that they’re worse off and stop trying to maintain their real spending power by bidding up prices whether through higher wages or passing energy costs on to customers etc.

“What we’re facing now is that reluctance to accept that, yes, we’re all worse off and we all have to take our share; to try and pass that cost onto one of our compatriots and saying, ‘we’ll be alright, but they will have to take our share too’.

“That pass-the-parcel game that’s going on here, that game is one that’s generating inflation, and that part of inflation can persist.”

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