Britons must steel themselves for a sharp fall in living standards

Britons must steel themselves for a fall in living standards which could be as sharp and painful as in the 1970s, as the western world faces up to a new era of stagflation, a former Bank of England policymaker has warned.

Willem Buiter, one of Gordon Brown's first appointees to the Bank, said Britons face a "painful couple of years", and urged the Monetary Policy Committee to raise rates twice to cap inflation.