British families must "accept that they’re worse off" following a jump in inflation rates, a Bank of England boss earning a salary of £190,000 per year has said.
Huw Pill, the Bank's chief economist said that Britons should stop seeking pay increases which are pushing prices higher.
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.
Inflation was five times higher than the Bank of England’s two per cent target in March at 10.1 per cent.
Inflation was five times higher than the Bank of England’s 2 per cent target in March
PA
Speaking on a podcast produced by Columbia Law School in New York, the economist explained that it’s natural for a household to appeal for higher wages in response to surging 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 exports, mainly services, which the UK sells to the rest of the world.
He added that that there was a “reluctance to accept” that Britain had become collectively poorer but claimed it was an inevitable consequence of the jump in energy prices following the invasion of Ukraine.
“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, 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.”
His comments come after Bank of England Governor Andrew Bailey, was widely criticised last year after urging workers not to ask for big pay rises, in a bid to stop prices rising out of control.
According the the central bank’s annual report, Pill received a £95,000 pay package for his first six months when joining the BoE in 2021, while Bailey was paid £495,000 in the year to 28 February 2022.
Unions threatening to strike for better wages have slammed Pill over the comments, accusing him of being tone-deaf amid the largest hit to living standards in decades.
BoE governor Andrew Bailey, was widely criticised last year after urging workers not to ask for big pay rises
PA
Laurence Turner, head of research and policy at GMB union, told The Telegraph: “It's staggeringly crass for one of the best-paid public officials to tell working people they should accept poverty wages during the worst cost of living crisis in living memory.”
His remarks have also angered trade bodies, with the Federation for Small Businesses (FSB) hitting out at the comments.
Tina McKenzie, its policy chairman, said: “Small businesses will be rightly angered by these tone-deaf comments from Mr Pill as they struggle with inflation that is still sky-high."
In the UK, food and non-alcoholic drink inflation is the highest in 45 years, with prices rising by over 19 per cent in the year to March.
