New figures released yesterday show that it you don’t deliberately make things more expensive, then prices don’t rise as quickly as when you do.
Inflation fell to 3.9% as a result of last years VAT increase no longer affecting the year-on-year price increases.
Economics expert David Waltham told us, “What you’re seeing here is yet more proof of the poorly-understood economic effect of deliberately making things more expensive – things go up in price more quickly.”
“Conversely, not making things more expensive tends to make prices rise more slowly.”
“I mean, hypothetically, if you added another 2.5% tax on pretty much everything, overnight, then you will almost always see prices go up more than if you didn’t add 2.5% tax.”
“We’re not yet sure of the exact economic mechanism which links those two facts, perhaps we need more well-funded research?”
People who don’t really understand this sort of thing have asked if reducing prices could also slow down rising prices.
As one economist said. “It’s a good question, and you’d think so wouldn’t you?”
“But if you’re expecting the chancellor to lower VAT in order to meet the government’s infaltionary targets then you’ll have a bloody long wait.”