Rather than inflation in the UK being the result of a series of one-off occurances as Mervyn King insists, perhaps we are heading for a new world-wide era of Austerity. With inflation rather than deflation being the main global issue. What we have been promoting as our Regional Prosperity and Inflation Framework, might well have to serve as an ‘Austerity & Inflation’ Framework.
It looks like a trend has now firmly set in for us to be the inflationary economy which besides undermining our living standards will help overseas companies hold their grip on our home markets.
None of our current inflation indices register the unique house price inflation the UK has had. Had they done so in any manner comparable to Germany and the US, there would have been far higher inflation registered across the UK under New Labour. Looking at housing affordability indices gives us some idea of the seriousness of the real inflation being missed. And an index that shows this up region by region would show a revealing story for the West Midlands. We show what it would reveal.
The new government have inherited the highest inflation rate in the G7. And as they consider any sort of increase in VAT to pay off national debt they need to think about how they keep their finger on the national pulse as the country faces these challenges to their living standards. More like Ronald Reagan than Margaret Thatcher.