Inflation in 2022-2023 – History tels us we have been here before

The rate of inflation depends on the mixture of goods and services you buy. Everyone will be different, but the rate is thought to be north of 10% with some commentators suggesting it could rise to 18% next spring – worrying times.

Some of us will have seen this before in the early 1970s In the UK inflation spiked at from 9.2 % in September 1973 to 12.9% in March 1974. It was sparked by the OPEC oil crisis and commodity price increases, unemployment increased, fuel rationing was planned using ration books from the second world war and electricity was rationed (the basis of three-day working weeks in some industries).

The Prime Minister was Ted Heath, an example of inflation being the price of a new Mini rose from £595 in 1970 to £2,400 in 1979. Price rises were eventually halted by the election of Margaret Thatcher and her decision to raise interest rates and impose spending cuts.

Many of us can remember the mortgage rate increasing almost daily in the 1980s. This was also due to a sharp rise in oil prices pushing high rates of inflation to new double-digit highs. Countries such as the United States, Canada, West Germany (as it was then), Italy, the United Kingdom, and Japan tightening their monetary policies by increasing interest rates to control inflation (sourse Wikipedia).

I remember buying a Yamaha 350 in 1973 and wondering how I was going to afford to run it. My first mortgage commenced in 1979, but in the mid-1980s, I was stretched to afford 13.5% interest rates.

The government did take action and eventually the pain went away, but I cannot remember any handouts, the oil producers held the trump cards and there were few options like energy efficient this or that and housing stock was not designed to be particularly well insulated.

In time better solutions were invented, we gradually weaned ourselves off oil from Saudi Arabia, developed more efficient vehicles and appliances and became familiar with a world that had changed before our eyes.

I appreciate that many individuals and families will be hard hit this winter because a greater proportion of their budget will be spent on fuel and energy, if the same actions are taken by central government, we can look forward to higher interest rates that will impact on borrowing and threaten job security for some. 

Just as COVID changed some aspects of our lives for ever, this predicted bout of inflation will alter the lives of many, few commentators have the answers other than modest tinkering at the periphery. This issue will, in my opinion, need someone with vision and determination to get us through.