Why some in the UK Government may be happy inflation is rising

As we also know from food campaigner Jack Monroe, inflation can impact on those with lower incomes much harder than it does on those who enjoy higher pay.

As her evidence undoubtedly shows, food prices have increased significantly over the last year, and we are all aware that petrol, diesel and gas prices are going up, as will electricity prices in due course. So to have train fares. It almost feels as if there is a conspiracy to exploit the disruption created by Covid to grab a one-off opportunity for there to be price increases.

What I want you to do is to hang onto that idea of a conspiracy for a moment. Whilst I am not denying that there have been real price increases for things like food, and oil and gas, the more time I've spent thinking about the current inflation the more I've come to think that some of it is not by chance, but maybe by design, and some at least in the Westminster government might be quite happy about this inflation arising.

READ MORE: Here's what Scotland can do to avoid a future cost of living crisis

Such a big claim requires explanation. Mine is in essence a very simple one. The simple fact is that for more than a decade, since the financial crisis in 2008, interest rates have been close to zero. During that same period inflation has also been low. Putting these two facts together, the Bank of England has had no excuse to push interest rates upwards. As a result, they have not been able to fulfil the demands made by financial community for what they have called "a return to normal", by which they mean higher interest rates. That is because within the Bank of England rulebook the only reason for increasing interest rates is to tackle rising inflation.

What we now know is that inflation began to increase in the summer of 2021. It is only since last August that it’s been consistently above 2%.

What we also know is that this is a trend not found just in the UK. The USA and Europe are also suffering higher rates of inflation. In other words, something real has happened.

That something real was that Covid severely disrupted the supply of many products once most lockdowns ended. When that happened those people fortunate enough to have made savings during the Covid lockdowns wanted to spend. The trouble was, not everything that they wanted to buy was readily available. As a result, they bid up the price for things like secondhand cars, new kitchens and other such items. That started driving inflation up.

With previously slow inflation, the Bank of England hasn't had an excuse to raise interest rates

However, such was the pressure on transport after Covid, and such is our dependence on imports of things like food, that the price of many more basic products then began to increase as well. On top of that, stresses with regard to gas supplies from Russia began to push up the price of energy, largely because countries like Germany are heavily dependent upon supplies from that country, and their desperate attempts to buy gas elsewhere disrupted the market.

All of this is real. Much of it is also very temporary. Assuming that Putin does not invade Ukraine, and at the time of writing I think that invasion is unlikely, the energy price crisis will fade. Food prices are already falling around the world. Supply chains are also getting back into some kind of order, and that is likely to remain the case as long as hostilities do not break out. In other words, although we've been through a short-term period of high, and uncomfortable, inflation there is very good reason why we should expect the rate of inflation to decline significantly by this coming summer.

That, however, is not what those who want to push up interest rates want to hear. That, I very strongly suspect, includes the Bank of England. In fact, they have already increased interest rates, without any clear indication as to why, when there is no way on earth that increasing interest rates will improve supply chains of gas, food, cars, or anything else. In fact, all they are doing is adding another type of inflation, with regard to the cost of money, onto the inflation that we are already suffering.

READ MORE: UK inflation rises to highest level for 30 years as food prices surge

But, is it possible that this inflation is deliberate? I suggest that it might be. After all, the increase in energy prices is a matter ultimately under the control of the government because they set the price caps. So too are train prices government controlled, as are increases in local taxation. Come to that, so too are interest rates government controlled, and as a consequence the cost of mortgages is heavily influenced by the government, and that in turn has a significant impact on rents payable.

Add all this influence up and the government appears to be doing little or nothing to constrain these price increases that it could influence. Even where it is suggesting that it might provide help, for example with energy costs, the measures that it will take appear designed to sustain reports of high inflation when other options it could have chosen would have cut the absolute price we have to pay, and so reduced the rate of inflation, which would have reduced the pressure on interest rates.

I am left with the uncomfortable impression that the government is doing very little to really control inflation and might even want it. That’s because it wants to increase interest rates, which benefits the City of London, and the well off. Vitally, it also wants to use high-interest rates as an excuse to impose austerity, which still seems to be at the heart of the Conservative project. And, of course, the government wants to push down real wage rates, because that favours the employers it serves.

I wish I did not think that we are facing an inflation conspiracy, but I think we are.