The Great Debate UK
Inflation impoverishes Britons the easy way
– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –
Critics might say the UK’s inflation target is just for fun. Consumer prices were 3.4 percent higher in March than in the previous year, well above the 2 percent target rate, but the Bank of England will do nothing at all.
If the central bank were serious, shouldn’t it raise interest rates and crush every bit of life out of the UK economy? Not really. The UK has above target inflation because world oil prices are high, the pound is low and VAT is up. But it has inflation for poorer and richer.
Poorer because UK prices are pushing up while most incomes aren’t and interest income is not keeping up with prices. Rebalancing was what the economist doctors ordered and this is how it comes, in nasty monthly pills that show prices have gone up more than pay packets.
The UK wants growth but needs to tighten its belt. It has a big trade deficit which will fall when Britons export more and consume less. It has a big fiscal deficit which the government needs to cut. Draconian cuts to public wages, Irish style, wouldn’t be politically acceptable, while a bit of inflation is an easy way to erode wages, pensions and debt.
Part-paid gilts should return
– Neil Collins is a Reuters columnist. The opinions expressed are his own –
LONDON, April 23 (Reuters) – The UK Government needs to raise four billion pounds a week, every week, in the financial year to next April, to bridge the gap between its tax income and its spending.
