With every fare rise and fee increase, the government decides to defy the inflation hawks

This year and next, a full 0.6pp of inflation will be because of direct government decisions.

Last week, I wrote about how inflation is worst for those who spend a large proportion of their income on essentials. The cost of essentials, defined as food, housing, energy and travel, increased by 3.7 per cent last year, well above CPI's 2.8 per cent increase. Since the recession, essentials have increased in price by more than 33 per cent, while nominal incomes have gone up by just 10 per cent.

A large driver of that increase, however, is the direct effect of government policy. For instance, council tax, road tax and almost all public transport fares are set by the state, as are most of the costs of highly-taxed goods like alcohol, tobacco, fuel and heating and power.

Now, the weekly briefing note produced by Deloitte's Chief Economist, Ian Stewart, makes clear that a similar effect is happening to the headline rate of inflation. Stewart writes:

In its latest Inflation Report, the Bank noted that one of the reasons behind persistently high inflation was higher 'administered and regulated prices', i.e., prices affected by government or regulatory decisions. Of these, a key contributor has been the rising price of education, largely reflecting rises in undergraduate tuition fees. Another contributor is higher domestic energy prices as a result of current climate change and energy policies and further investment into the UK's gas and electricity distribution networks.

According to the Bank, these two drivers have, together, amplified UK inflation by 0.4 percentage points last year and will do so by 0.6 percentage points this year and the next.

The latter reason is something you hear a lot about from inflation hawks, given the frequent coincidence of climate scepticism and fear of inflation; the former, not so much. When it comes down to it, one way to keep inflation low would be to fund essential public services through general taxation or deficit spending, neither of which tend to be routes advocated by inflation hawks.

Stewart also pokes the Bank of England about whether or not it is strictly applying its mandate. Technically, the Bank has only one role: to keep inflation as close to its 2 percentage points target as possible, and certainly within one percentage point either side. But instead, under both Mervyn King and, it is expected, Mark Carney, the bank has refused to take actions to bring down inflation if they would harm growth. Stewart writes:

This approach has led some analysts to point out that the Bank now seems to place greater emphasis on growth than on its explicit inflation target. It is not just that, in the words of the Bank's governor Sir Mervyn King "policy is exceptionally accommodative to growth". A debate is underway as to whether the Bank of England, and indeed other central banks, should run even easier monetary policy, possibly risking higher inflation in the long term, in order to bolster growth. In December, the US Fed set itself an additional target of bringing down the US unemployment rate to below 6.5%, before it considers raising interest rates.

Mark Carney, the next governor of the Bank of England, has recently said that central banks should consider radical measures, including commitments to keep interest rates on hold for extended periods of time or scrapping inflation targets, to boost growth.

Needless to say, the fact that the Bank of England is not crushing our already anaemic growth to bring inflation down from around 3 per cent to around 2 per cent is a feature, not a bug, in the system. Regardless of what the inflation target actually is, the fact that the Bank tends to be run by extraordinarily talented individuals who are working for the financial health of the country means that they are prepared to make sensible decisions even if they aren't necessarily the prescribed ones. But the choices raise further questions about whether the monolithic inflation target is the right way to run a central bank in the 21st century.

A hawk. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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It's Gary Lineker 1, the Sun 0

The football hero has found himself at the heart of a Twitter storm over the refugee children debate.

The Mole wonders what sort of topsy-turvy universe we now live in where Gary Lineker is suddenly being called a “political activist” by a Conservative MP? Our favourite big-eared football pundit has found himself in a war of words with the Sun newspaper after wading into the controversy over the age of the refugee children granted entry into Britain from Calais.

Pictures published earlier this week in the right-wing press prompted speculation over the migrants' “true age”, and a Tory MP even went as far as suggesting that these children should have their age verified by dental X-rays. All of which leaves your poor Mole with a deeply furrowed brow. But luckily the British Dental Association was on hand to condemn the idea as unethical, inaccurate and inappropriate. Phew. Thank God for dentists.

Back to old Big Ears, sorry, Saint Gary, who on Wednesday tweeted his outrage over the Murdoch-owned newspaper’s scaremongering coverage of the story. He smacked down the ex-English Defence League leader, Tommy Robinson, in a single tweet, calling him a “racist idiot”, and went on to defend his right to express his opinions freely on his feed.

The Sun hit back in traditional form, calling for Lineker to be ousted from his job as host of the BBC’s Match of the Day. The headline they chose? “Out on his ears”, of course, referring to the sporting hero’s most notable assets. In the article, the tabloid lays into Lineker, branding him a “leftie luvvie” and “jug-eared”. The article attacked him for describing those querying the age of the young migrants as “hideously racist” and suggested he had breached BBC guidelines on impartiality.

All of which has prompted calls for a boycott of the Sun and an outpouring of support for Lineker on Twitter. His fellow football hero Stan Collymore waded in, tweeting that he was on “Team Lineker”. Leading the charge against the Murdoch-owned title was the close ally of Labour leader Jeremy Corbyn and former Channel 4 News economics editor, Paul Mason, who tweeted:

Lineker, who is not accustomed to finding himself at the centre of such highly politicised arguments on social media, responded with typical good humour, saying he had received a bit of a “spanking”.

All of which leaves the Mole with renewed respect for Lineker and an uncharacteristic desire to watch this weekend’s Match of the Day to see if any trace of his new activist persona might surface.


I'm a mole, innit.