Today life has got dearer again. Postage has soared, with the cost of a second class letter rising from 27p to 30p. I make that an 11% increase. It follows hard on the heels of the typical Council who want an extra 5%, and the railways who pushed their fares up by 6% (regulated) and more if unregulated.
These three important services have something in common. They are all government owned, in whole or part, and their prices are controlled by government! The government benefits from the extra revenue they collect, whilst losing from the inefficiency they often display in how they run themselves. Because they are largely monopolies they can spend what they like and charge it to the user, if the government is weak enough to allow them to do so.
We are told by some sages that the government’s worry is deflation. Deflation means falling prices. I see no deflation, with the CPI going up 3.2%. That understates the inflation many are feeling. Meanwhile the government is pushing up petrol and diesel tax so we all have to pay more at the pumps, and so deliveries become dearer.
It’s not just the monopoly public sector which is pushing up prices. The competitive private sector is having to pass on some of the 25% devaluation of the pound where it is importing manufactured goods, as I have pointed out before.
There is only one word to sum up what we are experiencing – slumpflation. The government sector is the main inspiration of the inflation we are now facing, just as its broken monetary and financial regulatory policies were the origin of the slump.
I see today Ireland has decided it does have to cut its deficit by a combination of spending cuts and tax rises. How much longer before Mr Darling bows to the inevitable?