A Bank of England boss has said people in the UK simply need to accept that they are poorer, arguing that ‘we’re all worse off’ if they don’t.
The cost of living crisis continues to impact households across the UK, affecting everything from the price of everyday groceries or a pint at the local, through to how much it costs to heat our homes and fill our cars.
The annual rate of inflation reached a 41-year-high in October last year, hitting an eye-watering 11.1 percent.
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While it eased in the months that followed, in March 2023 it was still as high as 10.1 percent, marking the seventh successive month of double-digit inflation.
But one economist has argued that people need to accept that they’re worse off’, saying our actions are ‘generating inflation’.
Huw Pill, the Bank of England’s top economist, said in a new interview that workers have added to inflation by demanding pay increases and that this, along with businesses putting prices up, have cause prices to rocket.
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Speaking on the Beyond Unprecedented podcast from Columbia Law School, he explained: "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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In a report published today (25 April), the UK government noted how high inflation affects ‘the affordability of goods and services for households’.
The report, titled ‘Rising cost of living in the UK’, said: “Consumer prices, as measured by the Consumer Prices Index (CPI), were 10.1% higher in March 2023 than a year before.
“Increases in the costs of consumer goods, underpinned by strong demand from consumers and supply chain bottlenecks, have been factors causing rising inflation in 2021 and 2022. Food prices have also been rising sharply over the past year and were 19.1% higher in March 2023 compared with a year before, a 45-year high.
“Another important driver of inflation is energy prices, with household energy tariffs and road fuel costs increasing. From March 2022 to March 2023, domestic gas prices increased by 129% and domestic electricity prices by 67%. Gas prices increased to record levels after Russia launched its full-scale invasion of Ukraine and continued to rise during much of 2022 due to cuts in Russian supply. Electricity prices are linked to gas prices and have followed a similar trend.”
Jess Hardiman