It is a “real worry” that increasing minimum wage seems to be the government’s “only tool” to tackle the cost of living crisis, a leading economist has warned.

Paul Johnson, director of the Institute of Fiscal Studies, said if wages are increased when the UK’s productivity is not rising “in the end it will just result in higher prices”.

Speaking on The Great Debate, Sky News’ weekly discussion programme, he said the increases in the minimum wage “up until now have been incredibly successful”.

Please use Chrome browser for a more accessible video player

“It’s gone up an awful lot over the last 10 years,” he said. “And that doesn’t appear to have caused any problems with prices, or unemployment. But going forward, there’s a limit to this.”

He said: “I think one of the real worries is it seems to be the only tool the government has.

“At the moment, it’s worried about people’s earnings, it’s worried about productivity, and the main policy it appears to have is just to keep on putting the national living wage up… that’s going to cause real problems.”

Energy boss claims 20 more suppliers face bankruptcy over ‘£5bn’ price cap bill

Boris Johnson insists his plans to cut carbon will not be enforced by the ‘boiler police’ – but some of his MPs are nervous about living costs

Heat pump grants: Boiler upgrade scheme will see households able to apply for £5,000 grant to replace gas boilers

UK productivity has slowed significantly in the past 10 years, according to ONS data.

Average annual growth was an average of 2.0% from 1990 to 2007, falling to an average of 0.6% a year from 2010 to 2019, according to calculations by the Financial Times using ONS data.

He said the UK is facing a “push up” in prices that has not been seen for “quite a long time”, with inflation heading up towards four or even five percent.

Please use Chrome browser for a more accessible video player

“That’s not the levels some of us can remember in the 1970s of 20%, but that is still a big increase in costs,” he said.

He said it is having a “much bigger effect on people on low incomes” due to its impact on things like fuel prices.

“Even if benefits go up in line with inflation, that’s still not going to be enough to make up for that additional cost for people who are on benefits,” he said.

Follow the Daily podcast on Apple Podcasts, Google Podcasts, Spotify, Spreaker

However, Lord Byrd, the founder of The Big Issue, welcomed the increase in the minimum wage, arguing that low salaries lead to “low delivery” and low productivity.

“It’s the government’s responsibility to lift us out of this hundreds of years of low wage economy,” he said.

Personal finance expert Emanuel Asuquo warned that many of his business clients will have to increase prices to pay for greater salary costs, which in turn leads to higher inflation.

Please use Chrome browser for a more accessible video player

“We have to be careful when we when we put that pressure,” he said.

He did agree that “the government needs to definitely do more to help the poorest”.

“We’ve seen discounts on stamp duty for people that want to buy a house, we’ve seen pensions now being able to pass without paying any tax,” he said.

“We’ve seen so much support for people who want to make money. but so many cuts when it comes to people who really need it most.”

Related posts:

‘Hard to see’ how Northern Ireland Protocol can remain sustainable, Brexit minister tells MPs Travel firm TUI joins airlines suing government over ‘inexplicable’ amber list rules The silence of friends sealed Matt Hancock’s fate – not the damnation of his enemies Hancock’s resignation means Johnson has lost his scapegoat for inquiry into govt’s handling of COVID ‘Explain to me why I shouldn’t just tell you where to get off?’ – Minister tackled over Hancock rule breach PMQs: Johnson apologises to businesses over ‘pingdemic’ after more than half a million told to isolate Former cyber security chief raises alarm over sale of Welsh microchip manufacturer to Chinese-backed company Minister drops strongest hint yet that vaccine passports will be needed for football matches ‘We can’t blow it now’: COVID cases could hit 100,000 a day – but England won’t move to Plan B yet Booster jab rules will not change unless JCVI says so, minister says MPs to be offered security guards for constituency surgeries following murder of Sir David Amess Moving away from EU rules is ‘national necessity’ and UK must reduce taxes, says Brexit minister