King’s ransom

How much bigger does Britain’s inflation have to become before Mervyn King realises it’s a problem? The VAT rise should have lifted prices by 2.1 percent – but shopkeepers over Britain have been applying far larger rises. Why? Because one of the most important factors in economics – expectation of inflation – is back. People are bracing themselves for another year of rising heat, transport and staff costs – so retailers hike up prices in anticipation, and a vicious spiral of inflation begins. The Retail Price Index was up 4.8 percent last November, and Consumer Price Index 3.3 percent. The price of this failure of monetary policy is paid by ordinary taxpayers, whose wages stand no chance of keeping up with the rise in prices. This is Mervyn King’s failure, and I look at this in a leading article in this week’s magazine – entitled “King’s Ransom” (subscribers click here,