Families will pay the price of soaring wages

IF the Bank of England’s forecasts are right, even tougher times are hurtling down the track for British families.

True, we have learned to take the auguries of economists with a pinch of salt, as they so often turn out to be excessively gloomy. But these latest predictions are stark.

The Bank says we will slide into recession by the end of this year and stay there for more than a year, with inflation peaking above 13 per cent as fuel and food prices continue to soar.

As a result, the base lending rate was raised yesterday by 0.5 percentage points, the highest single jump for 27 years, with the likelihood of more to come.

This means escalating mortgages and loan repayments for families already struggling to make ends meet and the risk of a housing market slump.

Though as ever, the high street banks are not planning to pass on the full rate rise to savers – another slap in the face for their customers and a disincentive for thrift.

Bank of England Governor Andrew Bailey has been rightly criticised for being slow to react to spiking inflation, which was predicted even before the invasion of Ukraine.

As early as May last year, his own former Chief Economist Andy Haldane warned in this paper that ‘the inflation genie is out of the bottle’.

Had Mr Bailey begun raising interest rates modestly then and cut off the quantitative easing money supply, we may not be in such a precarious position now.

But we have been here before and must hold our nerve. As the Mail’s City Editor Alex Brummer wrote on this page yesterday, this is not the 1970s.

Our economy is in far better shape to bounce back once this global crisis is over. And with unemployment low, we should be better placed than most European countries to recover.

One thing is certain, however. Caving in to militant union demands for huge public sector wage increases will make the inflationary spiral infinitely deeper and more prolonged for everyone. The Government must not let that happen.