{"id":69076,"date":"2023-04-04T08:16:09","date_gmt":"2023-04-04T07:16:09","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=69076"},"modified":"2023-04-04T08:16:09","modified_gmt":"2023-04-04T07:16:09","slug":"the-impact-of-inflation","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2023\/04\/04\/the-impact-of-inflation\/","title":{"rendered":"The impact of inflation"},"content":{"rendered":"

The IMF published a paper<\/a> yesterday highlighting some of the impacts of inflation.<\/p>\n

Some were totally predictable:<\/p>\n

\"\"<\/p>\n

It will be no surprise to anyone that the biggest negative impacts of inflation are on those in the poorest groups in society and that relatively speaking those in higher-income groups do much better.<\/p>\n

This is partly as a result of policy measures:<\/p>\n

\"\"<\/p>\n

As the IMF notes, austerity combined with tight monetary policy hits the poorest hardest. There is no surprise there. Of course, this could be countered. As the IMF notes:<\/p>\n

To safeguard the poor\u2014who benefit more from public services\u2014tax hikes or cuts in lower-priority spending must be combined with larger transfers. This strategy results, by design, in no drop in consumption for the poor, but also in a lower decline in overall consumption.<\/p><\/blockquote>\n

This is not happening sufficiently in the UK.<\/p>\n

But there is what the IMF call a surprise outcome for governments:<\/p>\n

\"\"<\/p>\n

Government debt-to-GDP ratios fall so long as inflation is constrained after breaking out. That is because the government wins at the expense of its bondholders, which s currently true. Of course, governments will claim this fall in debt-to-GDP ratios after inflation is a policy success. Actually, it is the result of their policy failure. In due course, that will need to be said.<\/p>\n

As it will also need t be said that the gain should be spent to address the problems inflation has created, but you can be sure governments will ignore that.<\/p>\n","protected":false},"excerpt":{"rendered":"

The IMF published a paper yesterday highlighting some of the impacts of inflation. Some were totally predictable: It will be no surprise to anyone that
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