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Inflation has no easy answers

Rubbish left by striking binmen in 1970. Roger Jackson/Central Press/Getty

With inflation soaring, everyone’s after a pay rise, says Dominic Sandbrook in the Daily Mail. The RMT wants 7% for its railway worker members. Local government employees and teachers are after around 11%, nurses have demanded 14% and criminal barristers want 25%. Earlier this week, doctors said they were seeking a “whopping” 30% over five years. And all, of course, are threatening to strike if their demands aren’t met. For those of us who were around in the 1970s, it’s all starting to feel “uncomfortably familiar”. And as that decade shows, Boris Johnson really has no easy choices.

He could emulate Harold Wilson, who caved to demands for double-digit pay increases to such a degree that even union leaders were (privately) shocked. But that only made things worse, pushing inflation to a record 26%. Wilson’s successor, Jim Callaghan, went too far the other way, imposing strict pay limits that resulted in the “nightmare of the strike-ridden Winter of Discontent”. It was Margaret Thatcher who finally got inflation under control – but only by pushing interest rates so high that it led to a “colossal” number of bankruptcies, foreclosures and job losses. Had her predecessors “shown more guts”, much of that pain could have been avoided. Johnson, to his credit, has said he’ll refuse to bow to excessive pay demands. Injecting billions more into the economy would both “fuel the inflationary fire” and increase our already swollen levels of government debt. But can he stick to his promise? Our economy depends on it.