Two months ago The Spectator reported on what was keeping Rishi Sunak awake at night ahead of the Budget: an inflation resurgence that could damage Britain’s economic recovery as it comes out of the pandemic. He deliberately designed his March Budget with inflation in mind, trying to make the UK’s finances ‘Biden-proof’ if inflation or interest rates started to move, and the cost of servicing the country’s debt became remarkably more expensive.
At the time, Sunak was a lone voice on the matter. His inflation fears put the decision to raise tax into perspective, but many remained critical of his rather cautious approach. Inflation seemed a strange focus as the conditions for major change appeared glaringly absent. Was Sunak just repeating a tired fiscal-hawk narrative, which also insisted after the 2008 crash that the headline figure for inflation would surge?
Around the same time as the Budget, Larry Summers (who worked in both Bill Clinton and Barack Obama’s administrations) started warning that the trillions being spent on Covid stimulus packages in the United States could lead to an inflationary spike.
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