Is Boris Johnson right that increasing benefits would end up hurting everyone?

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 5% 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.

The point is that it's highly unlikely that if Rishi Sunak had increased benefits by more than the paltry 3% he announced - which compares with projected inflation of perhaps 9% or 10% - 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?

Has he not noticed that it is pay rises in parts of the private sector that's fuelling inflation, not consumer spending by one-parent families and the disabled?

And another thing. Boris Johnson was explicit that if benefits were raised in line with inflation, that would lead directly to high mortgage payments.

As I said, that is questionable. But even if Johnson is on to something, those higher mortgage payments are neither here nor there for millions of people on benefits and universal credit - because they don't own their own homes.

So he is in essence saying that the incomes of those who are poorest need to be suppressed to protect the disposable incomes of homeowners. Which seems a slightly eccentric policy for a prime minister who calls himself a One Nation Tory - and it is precisely the opposite of his beloved "levelling up".


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