Inflation has been curbed: a success for the Government?
Wednesday morning came with the news that inflation was at just 0.2% – levels not seen since December 2015. This is undoubtedly good news for the economy. Low inflation means that we will undoubtedly see more spending.
But at what cost did this inflation drop come? According to the BBC and the ONS’ Deputy National Statistician, Jonathan Athow, it came at the cost of the Eat Out to Help Out scheme.
For those of you who haven’t enjoyed this scheme, its effect is to give each diner 50% off food up to the value of £10, which effectively cut most dining out costs for the general consumer in half. Having experienced this wonderful phenomenon myself when paying for a meal out, I can tell you that it made me want to go out again. It was clearly a good way to increase consumption.
On the other hand, the Eat Out to Help Out scheme cost, according to The Guardian, over £500 million to fund in the month of August, with over 100 million cut-price meals being eaten over the course of the month.
Now, of course, it had the desired effect of slowing inflation to an effective standstill, but on the other hand, this is an exorbitant cost to the taxpayer. It will only add to the increasing amounts of debt that we have had to take on as a result of the coronavirus crisis and its associated lockdown.
The question we must all ask ourselves is: can we afford this?
According to the Financial Times, the gross cost of the job retention scheme (furlough) will reach approximately £60bn.
This is money that we are now undoubtedly using for our own economic benefit, but in the long term, we will have to pay for it. This is a fact that people often forget when discussing government schemes – the fact that they cost money in the long run. To pay all of this money back in the future, we will undoubtedly be burdened with higher tax rates, which will stunt long-term economic growth.
The question we must ask ourselves is this: can we afford to keep using money to solve the problems of today by charging the people of tomorrow?