Britons ‘need to accept’ they’re poorer, says Bank of England economist
British households and businesses “need to accept” they are poorer and stop seeking pay increases and pushing prices higher, the Bank of England’s chief economist Huw Pill has said.
Pill said a game of ‘pass the parcel’ is taking place in the economy – as households and companies try to pass on their higher costs.
Speaking on a podcast produced by Columbia law school, Pill said that it’s natural for a household to seek higher wages in response to soaring energy bills, or for a restaurant to increase its prices.
However, he said the UK is a big importer of natural gas, and its price has gone up a lot compared with the services which the UK sells to the rest of the world.
“If the cost of what you’re buying has gone up compared to what you’re selling, you’re going to be worse off,” he said.
“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 higher wages or passing the energy costs through on to customers.
“And 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.”
“Instead, people] try and pass that cost on to one of our compatriots, and saying ‘we’ll be all right, but they will have to take our share too’.
“That pass the parcel game that’s going on here ….that game is generating inflation, and that part of inflation can persist.”
Pill’s comments come on a day in which Nestlé, PepsiCo and McDonald’s have all reported that higher prices boosted their sales this year, and as families face 17.3% grocery inflation in supermarkets.
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