Tuesday, 14 June 2011

Inflation - Fair shares for all?

So, with the latest published figures showing that CPI inflation remains at 4.5%, stubbornly above the government's bilateral 2% target, some commentators are now attempting to distinguish between the impact that inflation has on respective groups in society. The suggestion is that with the relatively poor seeing a greater proportion of their income spent on energy, food and what one might call 'necessities', the poor are being hit harder than the relatively better off. The rich on the other hand are more likely to have mortgages and spend a rather smaller proportion of their income on necessities, thus leaving them rather less hard hit than they might be.
Of course,this creates a conundrum for the government who will attempt to alleviate the problem through a progressive tax structure and re-distribute income to ameliorate the impact of the inflation. This however, could leave the authorities open to the charge that the policy disincentivises workers at a time when the economy needs to grow to ensure that it does not slip into the now infamous, 'double-dip recession'.

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