Let UK pay levels and working hours adjust to the market, says top BoE economist

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Andy Haldane says prolonging the UK’s wage-support programme could delay the economy’s much-needed restructuring

The Bank of England’s chief economist has thrown his weight behind the government’s controversial plan to let its wage-support programme end, saying that prolonging it could delay the economy’s much-needed restructuring.

Haldane’s remarks echo arguments made by both his boss, BOE governor Andrew Bailey, and chancellor of the exchequer Rishi Sunak, who is seeking to wind down support that has seen government debt balloon to over £2-trillion for the first time. “Keeping all those jobs on life support is in some ways prolonging the inevitable in a way that actually doesn’t help either the individual or the business,” Haldane said. “Our job as policymakers is to make that process of adjustment as seamless and as painless as possible.”

“Is it reasonable to expect that to be paid away” by companies “in a way that doesn’t affect their hiring and their investment?” he said. “And if not, how best can that debt burden be lightened?” Of those, one-in-four said they may have to scale down operations to repay it, and one-in-10 believe they could have to cease trading altogether. That risks creating the kind of longer-term economic scarring that BOE policymakers have warned about.

 

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