Column on the budget and soaring prices in 2022

Not my words but those of Jake Berry, leader of the influential Northern Research Group of Conservative MPs. His alarm springs from the prospect of a 50 per cent gas and electricity price rise in April, when the current Ofgem controls are relaxed.

That means the average household will need to spend around £2,000 a year to keep the gas boiler running and the lights on.

On top of that will come a tax rise in the shape of higher National Insurance payments. And most observers think the Bank of England could add to the pain with higher interest rates that make borrowing dearer. All this means the annual rate of inflation is set to jump to six or seven per cent, well above the pay rises most of us expect in 2022.

So has it ever been this bad before, I hear you ask? Well, yes, actually, not just this bad but far worse. Back in June 1975, UK inflation hit a yearly rate of 26.9 per cent, meaning that every 12 months everyone’s money lost over a quarter of its value. Led by the miners, militant union leaders fought back with pay claims of nearly 35 per cent backed by threats of strike action. And to add to the financial chaos, Bank of England base lending rates went up in 1976 to a record 15 per cent.

Such eye-watering numbers had a painful impact on our own family budget in the following years of rampant inflation. We came through without losing our house in north Colchester, but it was a close-run thing at times. As mortgages kept on rising, we thought of two ways of managing to keep up the payments.

One was to turn our daughters into coal-miners and reluctantly send them down the pit. The other was to switch our mortgage into a hard currency like the Swiss franc or the Japanese yen, offering rock-steady interest rates of around three per cent. Call me an old softie, but in the end we went for an affordable funny-money mortgage and our girls never needed to start wielding picks.

Gazette contributor Alan Hayman

If it’s any comfort, two factors that drove up inflation to dizzying heights in those days have more or less disappeared. With the effective collapse of union bargaining power, wages and prices can no longer chase each other upwards in a self-reinforcing spiral. And the Chancellor no longer directly controls lending rates, which are now set independently by the Bank of England.

Anyway, with millions of house buyers now choosing to borrow long-term at locked-in rates, how the Bank of England behaves no longer rocks the mortgage markets as it used to.

All this means the Government’s options in dealing with the coming crisis are looking decidedly limited.

Britain’s energy prices are largely out of national control, depending as they do on Arab and Russian willingness to sell us oil and gas at prices we can afford.

And, of course, the great unknown is the economic impact of Covid. Will it settle down to the level of a troublesome mild illness, like the winter flu? Or will fresh variants of the Covid virus prolong the pandemic for the rest of the year, bringing new lockdowns and pressure on the NHS? I suspect our masters and mistresses have no more idea of the answers to these questions than you or I do. But like the rest of us, they are whistling in the dark to keep their spirits up.