If a Labour government were still in power, and a shock inflation rise was announced, doubtless the current ‘all Labour’s fault’ mantra from the Tories would be heard.
Labour people being more reasonable, we accept that some of the factors lying behind yesterday’s rise to 3.7 per cent are beyond government total control; soaring oil prices for example, and other ‘international factors’ the Tories never like to accept as being part of the reason for the deficit they are now seeking dramatically to reduce.
But some factors can be laid very directly at the door of the Government, and the VAT rise is one of them. That was a choice not a neccessity. Not that long ago, we were all led to believe tax was likely to be raised from the bankers and their ott bonuses. But the Tories having bottled out of that, they went for VAT. Another broken promise. Another bad move. Another anti-progressive policy dressed up in Maggie’s ‘no alternative’ language. There were alternatives and there still are.
The Bank of England meanwhile has fewer alternatives. If it is to get anywhere near meeting the inflation target – its remit and the core of its credibility – then interest rates will have to go up. But then that could provide another blow to the fragile recovery. Rock and hard place. They are there in part because they have a tough job at the best of times; in part because of what is happening in the rest of the world economy, still coping with the fallout from the global crisis; and in large part because David Cameron and George Osborne put them there as part of their cuts/tax rises/no strategy for growth economic agenda.
Every time you fill up the car, buy yourself something for the house, or look at the costs of running a small business, it is worth remembering that.
Ps, I am on BBC Question Time from Burnley tomorrow, with Burnley defender Clarke Carlisle (the programme’s first ever pro footballer), Caroline Spelman, Simon Hughes and George Galloway. I am looking to the website’s Finnish economic adviser Olli Issakeinen to be posting a bit of advice on how to handle the inflation/interest rates question should it come up. He is also pretty sound on public services so thoughts from him and all of you welcome on the NHS reforms, AV, Tunisia, the Chilcot Inquiry and anything else you think might come up.