Huw Pill, the Bank of England’s chief economist, took a tactless approach last month to explaining life’s realities amid high inflation, saying that people should simply accept that they are now worse off than they used to be. But after resounding criticism, Pill apologized for his remarks this week—kind of.
Pill was slammed by other economists, trade unions, and even his own boss last month after he called inflation a game of “pass the parcel” during a podcast interview produced by Columbia Law School. He explained that companies raising their prices or individuals asking for higher wages were passing on the effects of inflation to the wider economy, instead of just coming to terms with the fact that they were poorer than before.
“If the cost of what you’re buying has gone up compared to what you’re selling, you’re going to be worse off,” he said. “So somehow in the U.K., someone needs to accept that they’re worse off and stop trying to maintain their real spending power by bidding up prices.”
Pill attempted to make amends during a virtual Q&A session Monday evening, where he conceded his word choice was less than ideal. But while he took responsibility for his “inflammatory” remarks, he also painted himself as a messenger with the difficult task of relaying a reality that is almost impossible to sugarcoat.
“If I had the chance again to use different words I would use somewhat different words to describe the challenges we all face,” he said.
“Although we have some difficult messages to bring. I will try and bring those messages in a way that is perhaps less inflammatory than maybe I managed in the past.”
Annual inflation in the U.K. is currently 10.1%, with food and drink prices especially high at 19%, so it’s unsurprising that Pill’s comments last month largely fell on flat ears. Even Bank of England governor Andrew Bailey stepped up last week to reassure Brits that the central bank was “very sensitive to the position of people, all people, but particularly people on lower incomes.” He also admitted Pill’s choice of words was “not the right one.”
“I have to be honest and I think he would agree with me,” Bailey said.
In his apology on Monday, Pill said he and the central bank were well-aware “we live in difficult and challenging times,” while acknowledging that the problems of high inflation are “particularly acute for some parts of society.”
But he also reiterated that part of his job was to break these hard truths to the public. Pill insisted it was “important” to deliver messages on the realities of inflation in a “coherent and robust way,” while also suggesting the “viral response” to his earlier response had not been helpful in managing the central bank’s communication of inflation.
Pill’s comments highlighted an ongoing debate in both the U.K. and the U.S. over how central banks are tackling inflation. While Pill and Federal Reserve Chair Jerome Powell have pointed to rising wages as a key reason behind inflation, some detractors are pointing to excess corporate profits as a more primary cause, a phenomenon known as “greedflation.”
The greedflation argument goes that companies use existing inflation and other factors such as the pandemic and the war in Ukraine as cover for raising their prices and increasing their profit margins. Catherine Mann, a senior Bank of England official, warned in March that U.K. companies could be exploiting the cost of living crisis to raise profits, while a March study by Unite, the country’s largest private sector trade union, found that average profit margins in the U.K. had increased to 10.7% in the first half of 2022 from 5.7% in the first half of 2019.
Other British economists have pushed back against the greedflation narrative, however. Michael Saunders, a senior economic adviser at Oxford Economics and former rate-setter at the central bank, shared a corporate profit analysis of his in a note to clients this week that suggested most corporations were seeing profits dip. Outside of oil and gas companies, “share of company profits in GDP has fallen markedly,” Saunders wrote, adding that the recent surge in food inflation was likely due to “usual lags rather than profiteering.”
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