Robert Peston Robert Peston

Why is Boris Johnson suppressing the incomes of the poor?

(Photo: Getty)

As the Prime Minister pointed out this morning, looming recession and soaring inflation are not uniquely British problems – though right now the UK economy is slowing faster than many of our rich country competitors.

In the US for example, the IMF’s former chief economist Ken Rogoff has warned just today that the Federal Reserve’s official interest rate may have to go as high as five per cent to suppress rampant inflation.

Which is one of the reasons I was nonplussed when the PM told Susanna Reid on ITV’s Good Morning Britain that he’s reluctant to increase universal credit and benefits and protect poorer people from the ravages of inflation because doing so would stoke inflation and force the Bank of England to put up interest rates.

If the PM wants to impose an incomes ceiling, why should it only apply to those on benefits and universal credit?

The point is that it’s highly unlikely that if Rishi Sunak had increased benefits by more than the paltry three per cent he announced – which compares with projected inflation of perhaps nine or ten per cent – this would have added devastating momentum to the UK’s inflationary spiral, such that the Bank of England would increase interest rates by more than it is likely to do anyway.

But even if the PM is right and putting up benefits by nearer the rate of inflation would reinforce runaway price rises – a view few economists would endorse – quite an important question is begged.

If the PM wants to impose what used to be known as an incomes policy – a ceiling on rises in incomes – why should it only apply to those on benefits and universal credit, why should it apply only to the poorest people?

If he and the party of Margaret Thatcher have been converted to the idea that curbing pay rises is the most efficient way to rein in inflation, if they think we have to get back to the kind of incomes controls we last saw in the 1970s, why isn’t the PM legislating to prohibit high pay rises for everyone, especially those at the top of the income spectrum?

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