The economist hailed the positives about how the UK economy has performed since Brexit put forecast two major challenges coming down the road which will need to be worked out by the Prime Minister and the Chancellor. Soaring energy and fuel bills, as well as the Ukraine war, have contributed to soaring inflation rates the economist warned while he added monetary policy over the last year has been “mishandled” by the Bank of England.
Mr Lyons told GB News: “There is no doubt there is lots of positives about the UK economy.
“At the moment, those positives are overshadowed by two immediate problems and challenges.
“One is the inflation challenge that’s very apparent and will be with us for some time and the other challenge is that the economy looks like it’s already starting to lose momentum.
“And the danger is that loss of momentum will continue, as the post-pandemic rebound wears off, and as policy tightening starts to feed through, so yes, there are positives and indeed labour market data this morning shows many jobs still being created.
“But despite that, the two big challenges we face are an inflation problem and the likely slowdown in the economy as the rebound wears off, and as the policy situation sees further tightening.”
He continued: “There’s two issues here of monetary policy and fiscal policy, monetary policy in terms of the Bank of England and interest rates and reversing their printing of money.
“Now the Bank of England has in many respects handed the Government a hospital pass because the Bank of England has mishandled monetary policy in the last year or so.
“Now, monetary policy has been tightened with interest rates set to rise further, but monetary policy and fiscal policy are not like different ends of a seesaw because fiscal policy can ease doesn’t mean monetary policy needs to tighten or because monetary policies going up does mean fiscal policy needs to go down.
“And that leads on to the debate that you’re asked about fiscal policy, which is government spending and taxation review at the Treasury, and I would say a number 11, and this is permeating that seems to the Prime Minister as well, is that you can’t really go ahead with easing fiscal policy through tax cuts until you’re convinced that monetary policy is working and that inflation is starting to peak.”
Britons have seen rises in their pay packets fall behind soaring inflation at a record pace as the cost-of-living crisis tightens its grip on UK households, according to official figures.
The Office for National Statistics (ONS) revealed that regular wages excluding bonuses plunged by 4.5 percent in April when taking Consumer Prices Index (CPI) inflation into account – the biggest fall since records began in January 2001.
It comes as inflation has jumped to a 40-year high of 9 percent due to soaring energy and fuel bills amid the impact of the Ukraine war, and as economies emerge from the pandemic.
The ONS data showed that, in the three months to April, regular pay excluding bonuses fell 3% after the impact of inflation – the biggest fall since November 2011 – despite a 4.2 percent rise in average earnings.
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But in a welcome dose of good news on the economy, the figures showed the number of UK workers on payrolls rose by another 90,000 or 0.3percent between April and May to 29.6 million.
The unemployment rate edged up slightly to 3.8 percent in the three months to April, from 3.7 percent in the previous three months, though it remained close to 50-year lows.
Job vacancies also rose to a new record of 1.3 million despite a further slowdown in the rate of growth, while the redundancies rate to a new low of 2 percent in the three months to April.
Chancellor Rishi Sunak insisted the statistics show Britain’s jobs market “remains robust with redundancies at an all-time low”.