The biggest fiscal curse facing the nation, we have repeatedly been told by the government and the Bank of England, is inflation. The country has been in the midst of a period of intermittent and varied industrial unrest since before Christmas. The Chancellor of the Exchequer, Jeremy Hunt, has said that inflation, which is running at just over 10% at present, was the biggest driver of these strikes over pay. However, in his budget last Wednesday he offered no new money to help resolve the disputes. Paul Johnson, the director of the Institute of Fiscal Studies (IFS), observed: “That’s a political choice. Money for motorists but not for nurses, doctors and teachers,” thus reflecting the £6 billion that had been spent to freeze fuel duty. (Others had characterised Hunt’s road-improvement assistance as ‘money for potholes but not for posties’.)
To be fair, pay negotiations between government and trade unions seems to have picked up pace in recent days, even if Hunt remains faithful to his mantra that ‘the best pay rise would be to get inflation down’. If things go according to plan, which might be quite a big IF, inflation will be below 3% by Christmas. But none of this can obscure the fact that according to the Office of Budgetary Responsibility, the next two financial years, this and next, will see a general fall in living standards of a cumulative 5.7%, which would be the worst two years on record for household finances. As the outlook stands, household disposable incomes in 2027 will be no higher than in 2017. It is, according to the IFS, the lost decade.
Still with percentages, The Guardian headlined the Budget as ‘Giveaway for the 1%’, a reference to the pensions reforms Hunt announced as part of an attempt to deter older skilled workers from retiring from work so early, a move that unequivocally will help the better off. It is likely another big IF as to whether that will work according to plan. We shall see, but for sure, going back to where Hunt came in, inflation affects us all. A friend of mine rents a caravan on a site in Norfolk. In two years, his annual rental has gone from £1200 to £2200. And talking about smelling the coffee – a flat white at Pret a Manger has inflated likewise: gone from £1.70 to £3.30 in what seems to be just about the time it takes to drink it.
Still, if we in the UK think we have it bad, spare a thought for the folk of Argentina. (The capital, Buenos Aires, is pictured on the home page.) As a writer in the Financial Times put it rather nicely the other week: “Inflation is so ingrained in daily life that Argentines talk about it in the same way the English talk about the weather.” A little over 30 years ago, it reached 3,000%. Yes, 3,000. That makes our 10% seem pretty paltry. So does the fact that last year inflation hit a three-decade high of 95%. You will not perhaps be surprised to learn that the dollar is the local currency of choice; maybe more so that apparently a crisp $100 bill gets you more pesos than two $50 notes. Either way, as one local businessman put it: “The prices go up in the lift and the salaries go up the stairs.”
With inflation, of course, the only way is up.