IEA Economics Fellow Julian Jessop has appeared on BBC Radio 2 to discuss comments by Bank of England Chief Economist Huw Pill, who argued that Britons ‘need to accept’ that we are poorer.

Julian said:

“There is undoubtedly a productivity problem in this country and that’s the main reason why real wages (pay adjusted for inflation) has been so weak for many many years. That is the fundamental problem that needs to be addressed.

“I don’t think that what Huw Pill has said today is actually helpful here. Clearly, the comments were very insensitive. There is an element of truth in what he said, I think most economists would agree that if you get big pay increases that are not justified by productivity, then that could potentially make the inflation problem worse.

“But that’s not what we’re seeing now, there’s very little evidence of a wage-price spiral; yes wages are rising, but they’re not rising as fast as consumer price inflation and pay settlements don’t seem to be out of control.

“I get the sense that this is another example of the Bank of England trying to find somebody else to blame, whether it’s businesses or households, for their own failure to keep inflation under control.”