In response to the commenter who asked how higher UK interest rates can cut world food prices, they can't. But the point is that an increase in import costs, such as food and increasingly oil as we've pumped much of it out, is a REAL loss of living standards. We now have to send (say) 5% of our income to the middle east or Canada, and as such its not money we can spend on other goods. An interest rate rise essentially makes this happen, and so other goods will fall in price, offsetting the rise in price of oil/food.

John, inflation will cause people to want wage rises, private sector workers on the whole will be unable to get them. However, my link above is to a debate started today on Tory tax policy.

I think the current thinking on the front opposition bench is muddled, please can you help them to some clarity on their thinking.

Where are the promises of spending cuts which will be needed to allow changes to the tax system. Why even with a big lead in the polls is the nettle not being grasped?

I agree with your point about only certain sectors having the ability to dictate pay increases. I would concede that (so far fingers crossed) my employees have been quiet on this front. They see the sales figures and know their positions are precarious. However, there's a minimum wage increase in the pipeline that the government is unlikely to renege on. The minimum wage is often overlooked, but I would suggest it's one of the most inflationary factors there has been and many of the current problems are a manifestation of it. Socialist fools just don't understand that you can't just proclaim everybody wealthier without ramifications. Having said that the Bush administration sent everyone tax rebates – short term gain, long term pain.

I think we may have waved deflation, in everthing but property and second-hand cars, goodbye for quite a while. Only time will tell who's right, I actually hope it's you, but I think that's being Pollyannaish.

As for the tanker drivers, I think they have now realised that they are a choke point for energy supplies rather like the miners did in the 1970’s I don’t think we have seen the last of this.

You are exactly right. The level of government debt and spend is inflationary and this is the real “elephant in the room” that neither the bank, nor the government nor the good ol’ Pravda-BBC want to admit. And thus I fear it will continue.

What price Darling scurrying off to the IMF a la Denis Healey in another 1970’s parallel?

The government doesnt create inflation by spending money. Darling knows that full well, so why lie. Why do our politicians hate the people so much.
Will Nuliars be getting rid of their 'inflationary' minimum wage then?

An end to the bottomless 2012 slush fund?

no chance!

It is all starting to sound like the seventies again. I think I need to brush up on such things as “the winter of discontent”; “the social compact” and “this will not affect the pound in your pocket”. Nations are much more tightly connected economically than they were in the seventies. Home grown wage push inflation, will kick us out of the game much faster than it did back then. But, the big problem is the public sector.

The last time Prof David B Smith calculated the size of the “non-socialised economy” [2006]; he reckoned the state was spending 48.75% of the GDP. That is, about 95.25 pence for every pound spent by the private sector, (based on non-oil, market price GDP). It will take a decade at least to rectify this problem, that is, if we could find anyone – assuming he does not have four stars on his collar – to fix it. I am not holding out much hope. But, we can’t say we weren’t told; every period of socialist government ends with the nation a busted flush.

I am but a simple man and certainly not an economist. Are you able to answer a question that is bothering me?
We were told yesterday that, the BoE monetary policy committee considered raising interest rates in order to help curb inflation.
It has been stated all over the media and on many blogs that the rise in inflation is down to rising global oil prices and rising global food prices.
I cannot understand how, raising interest rates in the UK will have any effect on world oil or food prices.
Perhaps you could explain to me and I suspect many of your readers, just how raising interest rates in the UK will bring down world oil and fuel prices.

Reply: It cuts demand in the UK, diverting money into paying interest and reducing the amount of money available to borrow. It will have only a very small effect on oil and food demand and therefore on world prices.