The spectre of inflation — a response from Frank Field

In his recent piece for TheArticle, Brian Griffiths sketched out one of the serious economic challenges we may face due to the threat of inflation, and how this threat may become a reality if we are not careful. Sterling is not a reserve currency and it would be foolish to argue that, because up to now we have been able to raise debt at historically low rates of interest that we will be able to do so ad infinitum. This will require Rishi Sunak, the Chancellor, at some stage soon to set out how we are going to get this debt down.

Here is the quandary — how do we give a signal to the financial markets that we are serious in getting debt down? There is also an issue of timing. Until the recovery is properly underway, it will be foolish to do so.

There are two main ways of dealing with our mega-debt problem. The first, of using inflation to do so, must be rejected, as Brian made clear. As he also advises, it is important that we do not break the lock whereby the Bank of England monetary policy committee’s single overriding and only objective is to counter inflation.

When the Chancellor sets out his long-term plans on debt relief, I hope he will introduce an annual, low, wealth tax on the real gains that are made from selling property. A commitment from both parties to tax wealth over the next 25 years is crucial.

A central campaign must therefore be to resist changes to the independence of the Bank of England, or to assign it the single, limiting goal of price stability alone. Before, when the bank had this role, the annual rate of inflation was in the 20 per cents. The inflation target should remain.

We must not go back to a situation in which nobody has the duty to maintain low prices. If inflation were to return, it would hit the poorest people hardest. High inflation would make it difficult to create new jobs, which is crucial for staging an economic recovery.

Setting the Bank of England a dual target of price stability, but also of increasing the jobs base, is the economic solution at the end of the rainbow. In no time the bank will be prioritising employment over inflation. We have a major job on our hands of how to encourage employment creation. And we won’t be able to do that if long-term job creators see any sign that the government is going soft on inflation, and that it intends to “debauch the currency”.