It appears to be a “perfect storm.” Post pandemic conditions, and the war in Ukraine, have conspired to create a global economic climate where the prices of all the essentials of life are increasing dramatically. Energy, food, fuel costs are all increasing at unprecedented rates, creating a “cost of living crisis” for all but the highest earners and the wealthy. This is likely to persist. Thus, for many, life is increasingly becoming a question of what to do in order to survive.
One of four key principles I cite in “Searching for Better” Book Two, is that, “Government is accountable for ensuring that the interdependence of life is recognised, established and maintained for the well-being of all citizens.” This makes government accountable for the well-being of all its citizens. So, it naturally follows that government bears some responsibility for reducing inflation.
This seems reasonable. Since the early Twentieth Century, government has absorbed greater powers and, as a result, people increasingly demand more from it. This includes expecting it to play a role in reducing inflation, notwithstanding that much of this capability – in the form of monetary policy – has been delegated to the Bank of England. Yet, here in the UK, the government has actually contributed to inflation in two ways:
- By increasing National Insurance Contributions (NIC.) These are born by both individuals and their employers and thus have the effect of reducing individual incomes, while increasing the cost of doing business. While the effect of this on lower earners has admittedly been reduced by raising the threshold for paying it, the overall effect is inflationary.
- Through failing to significantly reduce the levies charged on fuel.
It is possibly too late now to do much about the first point, but the following chart shows the extent to which government is exploiting the increasing price of fuel.
You may consider this justifiable in light of the increased borrowing (£440 billion) that government incurred as a result of the Covid pandemic. This does need to be repaid. But, there is scant evidence of any such intention. With the government effectively earning 45p for every pound spent on fuel, you can say it is failing in its primary responsibility to look out for the best interests of its citizens. With fuel costs inevitably adding to all other costs, this compounds the inflationary effect and exacerbates the effect on the less affluent members of society. Thus, by failing to act significantly to reduce the fuel levies, government is making a bad situation worse and delaying the resolution of the problem.
Reducing fuel levies may not solve the inflation problem, but it certainly could help reduce its scale. Even if this is the only way in which government can mitigate the effects of inflation, it needs to act now. Indeed, you could argue that, the longer it delays, the more it is culpable. Even to the extent of being guilty of malfeasance. It may feel secure in the belief that it is two years until the next election, and that people may forget, but that is playing the odds.
