Britons have to accept they have become poorer, a senior Bank of England official has said, claiming that an unwillingness to accept the nation’s downward mobility was fuelling inflation.

Huw Pill, Threadneedle Street’s chief economist, said: “[People] need to accept that they're worse off and stop trying to maintain their real spending power by bidding up prices, whether [through] higher wages or passing the energy costs through onto customers.”

Mr Pill said people and businesses were trying to maintain their standards of living and profits by either demanding higher pay or putting up prices.

However, he argued this was only likely to fuel inflation and compared the dynamic to a game of pass the parcel, where each player was unwilling to accept the burden of higher prices that make them poorer.

Mr Pill said: “That pass-the-parcel game that is going on here, that game is the one that’s generating inflation and that part of inflation can persist.”

He said there was a “reluctance to accept” that Britain had become collectively poorer but claimed it was an inevitable consequence of the surge in energy prices since the invasion of Ukraine.

Mr Pill said: “When your energy bill you get every month for your house goes up four or five times, that's eating into your income. What's the natural thing to do? Well, the natural thing to do is say, I need to be paid more.

“But then of course, that process is ultimately self-defeating. In the end, the UK, which is a big net importer of natural gas, is facing a situation that the price of what you're buying from the rest of the world has gone up a lot, relative to the price of what you're selling to the rest of the world, which is mainly services in the case of the UK.

“You don't need to be much of an economist to realise if what you're buying has gone up a lot relative to what you're selling, you're going to be worse off.”

He said people would have to eventually accept “that yes, we're all worse off and we all have to take our share”.

The comments, made during an interview on the Beyond Unprecedented podcast produced by Columbia Law School in New York, risk reigniting criticism of the Bank of England for its handling of the worst inflation crisis in almost half a century.

The Bank’s Governor Andrew Bailey sparked anger last year when he urged workers not to ask for large pay rises and told businesses to stop trying to raise prices to beat inflation.

Critics argued Mr Bailey was trying to shift the blame for soaring prices onto workers and companies, rather than accepting the Bank’s own failings.

The central bank has been attacked for acting too slowly to rein in soaring prices in the wake of the Covid pandemic and the outbreak of war in Ukraine.

Another senior Bank of England policymaker on Tuesday defended the institution's record, denying that raising interest rates earlier could have made a meaningful difference.

Deputy Governor Ben Broadbent said: “If we had started three, four, five, six months earlier [there would have been], I don’t know, maybe a maximum of half a point less inflation.”

Inflation peaked at 11.1pc last autumn, suggesting Mr Broadbent believes earlier action would have only limited it to 10.6pc – still many times higher than the Bank’s 2pc target.

Mr Broadbent said that interest rates would have had to rise to nearly 20pc to stem the current bout of high inflation.

He said: “Suppose the MPC had had the foresight to see both the scale of the pandemic effects and the war, and the resulting second-round effects on domestic wage growth and inflation. And you ask yourself what path of policy would have held inflation at 2pc over the last two years?

“I can tell you the path interest rates would have to have got close to 20pc to achieve that.”

Raising interest rates to this level in an effort to anticipate events and tamp down inflation would have been hugely risky, Mr Broadbent said, given the uncertainty of events.

The Bank of England was the first major central bank to start raising rates in December 2021, when it lifted the Bank rate from 0.1pc to 0.25pc.

It has since increased borrowing costs another 10 times, bringing its benchmark rate to 4.25pc.

Inflation remains in double digits. It stood at 10.1pc in March, leaving Britain with the highest rate among rich advanced economies.