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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David Osland: “Corbyn is actually Labour’s only chance”

The veteran Labour activist on the release of his new pamphlet, How to Select or Reselect Your MP, which lays out the current Labour party rules for reselecting an MP.

Veteran left-wing Labour activist David Osland, a member of the national committee of the Labour Representation Committee and a former news editor of left magazine Tribune, has written a pamphlet intended for Labour members, explaining how the process of selecting Labour MPs works.

Published by Spokesman Books next week (advance copies are available at Nottingham’s Five Leaves bookshop), the short guide, entitled “How to Select or Reselect Your MP”, is entertaining and well-written, and its introduction, which goes into reasoning for selecting a new MP and some strategy, as well as its historical appendix, make it interesting reading even for those who are not members of the Labour party. Although I am a constituency Labour party secretary (writing here in an expressly personal capacity), I am still learning the Party’s complex rulebook; I passed this new guide to a local rules-boffin member, who is an avowed Owen Smith supporter, to evaluate whether its description of procedures is accurate. “It’s actually quite a useful pamphlet,” he said, although he had a few minor quibbles.

Osland, who calls himself a “strong, but not uncritical” Corbyn supporter, carefully admonishes readers not to embark on a campaign of mass deselections, but to get involved and active in their local branches, and to think carefully about Labour’s election fortunes; safe seats might be better candidates for a reselection campaign than Labour marginals. After a weak performance by Owen Smith in last night’s Glasgow debate and a call for Jeremy Corbyn to toughen up against opponents by ex Norwich MP Ian Gibson, an old ally, this pamphlet – named after a 1981 work by ex-Tribune editor Chris Mullin, who would later go on to be a junior minister under Blai – seems incredibly timely.

I spoke to Osland on the telephone yesterday.

Why did you decide to put this pamphlet together now?

I think it’s certainly an idea that’s circulating in the Labour left, after the experience with Corbyn as leader, and the reaction of the right. It’s a debate that people have hinted at; people like Rhea Wolfson have said that we need to be having a conversation about it, and I’d like to kickstart that conversation here.

For me personally it’s been a lifelong fascination – I was politically formed in the early Eighties, when mandatory reselection was Bennite orthodoxy and I’ve never personally altered my belief in that. I accept that the situation has changed, so what the Labour left is calling for at the moment, so I see this as a sensible contribution to the debate.

I wonder why selection and reselection are such an important focus? One could ask, isn’t it better to meet with sitting MPs and see if one can persuade them?

I’m not calling for the “deselect this person, deselect that person” rhetoric that you sometimes see on Twitter; you shouldn’t deselect an MP purely because they disagree with Corbyn, in a fair-minded way, but it’s fair to ask what are guys who are found to be be beating their wives or crossing picket lines doing sitting as our MPs? Where Labour MPs publicly have threatened to leave the party, as some have been doing, perhaps they don’t value their Labour involvement.

So to you it’s very much not a broad tool, but a tool to be used a specific way, such as when an MP has engaged in misconduct?

I think you do have to take it case by case. It would be silly to deselect the lot, as some people argue.

In terms of bringing the party to the left, or reforming party democracy, what role do you think reselection plays?

It’s a basic matter of accountability, isn’t it? People are standing as Labour candidates – they should have the confidence and backing of their constituency parties.

Do you think what it means to be a Labour member has changed since Corbyn?

Of course the Labour party has changed in the past year, as anyone who was around in the Blair, Brown, Miliband era will tell you. It’s a completely transformed party.

Will there be a strong reaction to the release of this pamphlet from Corbyn’s opponents?

Because the main aim is to set out the rules as they stand, I don’t see how there can be – if you want to use the rules, this is how to go about it. I explicitly spelled out that it’s a level playing field – if your Corbyn supporting MP doesn’t meet the expectations of the constituency party, then she or he is just as subject to a challenge.

What do you think of the new spate of suspensions and exclusions of some people who have just joined the party, and of other people, including Ronnie Draper, the General Secretary of the Bakers’ Union, who have been around for many years?

It’s clear that the Labour party machinery is playing hardball in this election, right from the start, with the freeze date and in the way they set up the registered supporters scheme, with the £25 buy in – they’re doing everything they can to influence this election unfairly. Whether they will succeed is an open question – they will if they can get away with it.

I’ve been seeing comments on social media from people who seem quite disheartened on the Corbyn side, who feel that there’s a chance that Smith might win through a war of attrition.

Looks like a Corbyn win to me, but the gerrymandering is so extensive that a Smith win isn’t ruled out.

You’ve been in the party for quite a few years, do you think there are echoes of past events, like the push for Bennite candidates and the takeover from Foot by Kinnock?

I was around last time – it was dirty and nasty at times. Despite the narrative being put out by the Labour right that it was all about Militant bully boys and intimidation by the left, my experience as a young Bennite in Tower Hamlets Labour Party, a very old traditional right wing Labour party, the intimidation was going the other way. It was an ugly time – physical threats, people shaping up to each other at meetings. It was nasty. Its nasty in a different way now, in a social media way. Can you compare the two? Some foul things happened in that time – perhaps worse in terms of physical intimidation – but you didn’t have the social media.

There are people who say the Labour Party is poised for a split – here in Plymouth (where we don’t have a Labour MP), I’m seeing comments from both sides that emphasise that after this leadership election we need to unite to fight the Tories. What do you think will happen?

I really hope a split can be avoided, but we’re a long way down the road towards a split. The sheer extent of the bad blood – the fact that the right have been openly talking about it – a number of newspaper articles about them lining up backing from wealthy donors, operating separately as a parliamentary group, then they pretend that butter wouldn’t melt in their mouths, and that they’re not talking about a split. Of course they are. Can we stop the kamikazes from doing what they’re plotting to do? I don’t know, I hope so.

How would we stop them?

We can’t, can we? If they have the financial backing, if they lose this leadership contest, there’s no doubt that some will try. I’m old enough to remember the launch of the SDP, let’s not rule it out happening again.

We’ve talked mostly about the membership. But is Corbynism a strategy to win elections?

With the new electoral registration rules already introduced, the coming boundary changes, and the loss of Scotland thanks to decades of New Labour neglect, it will be uphill struggle for Labour to win in 2020 or whenever the next election is, under any leadership.

I still think Corbyn is Labour’s best chance. Any form of continuity leadership from the past would see the Midlands and north fall to Ukip in the same way Scotland fell to the SNP. Corbyn is actually Labour’s only chance.

Margaret Corvid is a writer, activist and professional dominatrix living in the south west.