Britain needs a pay rise, says Bank of England economist

(Matt Writtle)

Andy Haldane, the departing chief economist at the Bank of England, says the UK economy is “going gangbusters” but that inflation is starting to be a concern.

And that Britain needs a pay rise to keep the economy going the right way.

The Bank sets an inflation target of 2%, something it has undershot for the duration of the pandemic. It is now at 1% and rising.

He said: “Two is a pretty good number, the risk is that we might overshoot that number for longer than we planned. That is not good news. We need to avoid any temporary blip in inflation becoming embedded.”

Talking to Nick Ferrari on LBC, he said the economy is surging, but could do even better.

Watch: Bank of England seeks views on economic impact

“Growth across the UK is picking up, going gangbusters actually, outstripping growth in the G7, it is still the case though that a bunch of businesses are paused and a bunch of workers are on furlough, so we need to keep up the momentum, get people back into pubs and restaurants,” he said.

“We should aspire to better. We need to keep spending demand in the economy strong, that is what creates demand for workers. It might require a few pay rises to make that happen. That will be one of the factors that will encourage people to get off their sofas.”

The praised Rishi Sunak’s response to Covid, saying: “The Chancellor has played a blinder, we went in big and we went in fast.”

On inflation, Haldane said: “We already see some pretty punchy pressure on prices. It is hard to find anything whose price isn’t going up. If both pay and costs are picking up, inflation on the high street isn’t very far behind. That may mean at some stage we need to start turning off the tap when it comes to monetary policy support.”

Haldane leaves the Bank at the end of the month after 32 years of service.

Watch: How to prevent getting into debt

Read More

Evening Standard Comment: Economic boom would be a sight for sore eyes