Bank of England ‘may force a recession to push inf lation away’
As Brown tells Rishi to ditch corporation tax rise...
THE Bank of England may have no choice but to ‘force a recession’ to bring down inflation, a top economist warned last night.
Paul Johnson, director of the Institute for Fiscal Studies, said drastic action may be required as the economy appears to be contracting.
It came as Gordon Brown said Chancellor Rishi Sunak will inevitably be forced to ditch his corporation tax rise this summer.
The former prime minister said fuel tax increases will also have to be cancelled to prevent inflation soaring even further.
Yesterday Mr Johnson told Times Radio: ‘It looks like we’re already in a period of negative growth. And I think the tough judgment the Bank may have to make is we may actually – and this is why they’re independent – they may have to, as it were, force a recession in order to get inflation out of the economy.’
Discussing concerns about public sector wage rises, the economist said: ‘I think there are two really important points here. One is energy prices have gone up, there’s been a world economic shock, we as a country are poorer. And so the question really is about how that pain is going to be distributed.
‘I think the danger is everyone gets high pay rises right across the economy, then the pain will come through higher unemployment, and higher inflation for a
long period of time.
‘The other thing it’s really important to say is the Government has actually spent a huge amount of money this year supporting people’s living standards: £400 off energy bills, £150 off council tax bills and National Insurance costs, £650 pounds for people on means tested benefits, and so on.
‘So actually, in terms of maintaining people’s living standards this year, they don’t actually need for this year to get a fully inflation protected pay rise because the level, particularly for people on modest incomes, of government
support is really outside of Covid pretty much unprecedented.’
Meanwhile Mr Brown , who was chancellor for a decade under Tony Blair, demanded Mr Sunak prepare for a fourth Budget to help tackle the cost of living crisis.
Corporation tax is currently 19 per cent but is set to rise to 25 per cent next year.
Speaking on the BBC’s Sunday Morning programme yesterday, Mr Brown said: ‘I suspect what the Government will have to do in the autumn is abandon their corporate tax rise. I suspect they’ll not be able to go ahead with their fuel tax rise, because that’s another pressure on inflation.’
He added: ‘I see millions of families in poverty and millions of children going to school ill-clad and hungry, people unable to afford to put up their heating. Something has got to be done about this and it has to be done in a far fairer way than the previous three Budgets.’
Asked about pledged income tax cuts, Mr Brown said: ‘The Government has got a problem because they’re promising income tax cuts at the same time as they’re promising better public services. They’re going to have to be honest with the public about what can be afforded.’
Mr Brown would not say what level of pay rise should be given to workers in the public sector but argued it should be set out over three years. He also floated the idea of a ‘cap on executive pay’.
Mr Brown added that Boris Johnson needs to force global action to deal with inflation and food shortages instead of lurching from ‘crisis to crisis’.
He said ‘any sensible government’ would be trying to get world leaders round the table to deal with the impending economic crisis and creating a plan for growth.
Mr Brown, who was in No 10 at the time of the 2008 financial crash, said world leaders ‘should concoct a plan’ to bring down oil prices, get food supplies running and impose controls on inflation.
Asked about Labour’s own plan for growth and accusations that Labour leader Sir Keir Starmer was not catching the public’s attention, Mr Brown said his successor should ‘ignore this’.
‘Because what’s exciting about Keir Starmer’s leadership is that he will have a plan for growth,’ he said. ‘I don’t think politicians need to be making outrageous statements, they need to get people talking.’
‘I see millions of families in poverty’
‘We are in a class struggle now. Are you going to be with us or sit on the sidelines while these Tories butcher the working classes? Stand up and fight!’
There is something tragically pathetic about the inflammatory, prehistoric rhetoric spewed out by Mick Lynch, the militant rMT union boss behind the rail strikes set to paralyse Britain.
While this tinpot revolutionary indulges his risible Che Guevara fantasies, the grim irony is that the blue- collar workers he professes to champion will suffer most.
employees able to work from home on Zoom won’t mind the chaos. But for millions – invariably the lowest paid – that’s simply not an option. If they can’t travel to their workplaces, their jobs and businesses will be jeopardised – and they’ll struggle to pay their bills and feed their families.
And what if police officers, nurses, firefighters and others vital to saving lives are prevented from doing their jobs? The consequences could be devastating.
By walking out on three alternate days, the hard-Left unions will inflict a whole week of misery on the travelling public.
The ingratitude to taxpayers, who shovelled £16billion into the railways during lockdown to keep them operating when trains were virtually empty, is staggering.
Of course, widespread industrial action will ultimately pile on the pain for the union members themselves – as it did during the Winter of Discontent in the late 1970s.
The more inconvenient it is for people to use trains, the greater the likelihood of them turning to other forms of transport.
That would further erode the network’s finances (already in a parlous state after the collapse of passenger numbers during Covid), so putting more jobs at risk.
To that end, the grasping unions’ huge pay demand is completely unrealistic. And their attempts to impede new working practices and technology are equally unreasonable.
Labour’s failure to unequivocally denounce the planned strikes is reprehensible.
Sir Keir Starmer accuses the Tories of exploiting the walkouts to fuel division, but that’s nonsense. The only ones seeking a political punch-up are the bullying barons.
So deeply in hock is Labour to its union paymasters that Sir Keir defiantly refuses to speak up for ordinary passengers. So much for being the party of working people!
Troublingly, teachers, NHS staff and barristers are now threatening to join the rail unions in holding the country to ransom in a 1970s-style Summer of Discontent.
To prove he’s on the public’s side, Boris Johnson should stand firm – and not cave in. That ransom must not be paid.