Does the future look bleak? (Credits: Getty)

Soaring inflation, rocketing interest rates, horrifying energy bills. No one is in any doubt that things are tough, but how did we get here? Sarah Savidson takes a sideways look back…

Why on earth would the Bank of England want to inflict even more financial strain on all of us right now, when energy bills induce cardiac arrest and millions of people cannot afford to feed their children?

Unpalatable though it is, the theory is it’ll be good for us – in the long-term. Inflation and interest rate rises used to be things that happened in the 1970s and, possibly, behind closed doors in fusty old banks.

Now they’re real. They hurt. And it is hellish. It’s also a crisis that is, largely, of our own making. Well, of successive governments’ and central banks’ making. How did we get here? It’s sort of like this…

1980s

We smashed all the rules and regulations and let everyone do whatever they liked to make loads of money.

1990s

Oh dear, we ignored the people who didn’t make loads of money. The music stopped, there weren’t enough chairs, we all fell on the floor

2000s

The global economy crashed in the 2000s (Picture: Shutterstock)

Technology is going to save the day! Oh, maybe not quite as fast as we thought. OK, we want to make people feel richer. Great idea!

How? If we stop including house prices and mortgage costs in how we measure inflation, we won’t have to raise interest rates even if house prices go through the roof.

While we’re at it, we could spend lots of money on public services. Let’s raid the pension funds by scrapping their tax relief and sell all our gold – noone’ll notice. And people will feel richer.

Oh, ALSO, we could also dream up some financial stuff that means we can create money by promising to pay money on money that doesn’t really exist. Oh s***. The global economy crashed. It’s OK!

Let’s just borrow loads. Put more money in the economy and there’s more money to be spent.

Cut interest rates and turbocharge that extra cash – it’s suddenly almost free to borrow money and spend on credit. We’ve saved the world – sorry, the banks!

2010s

Ummm, we have to pay the money back. Ouch. Oh, if we just keep interest rates basically at zero, it’ll be cheaper.

OK, let’s do that. We could also give less money to councils – I mean, they’ll have less to pay for police and old people in social care.

But hopefully no-one’ll notice, for a while anyway. And we could take more money off people?

Let’s call it austerity. Now that everyone’s really peed off, we could also have a flutter on Europe. Oh…

2019

Thank goodness. Stuff is getting better.

2020-2021

Covid changed everything (Picture: PA)

Covid. We can’t go to work. Help! It’s OK, we’ll borrow billions and billions of pounds more and work out how we deal with that later.

Right now people are dying and it’s an emergency.

We need to get the country going again or we are really going to be in a pickle. Let’s use the housing market again! Stamp duty holidays are the answer.

2022

Russia’s gone power-mad. All the ships are in the wrong places.

Ukraine’s under fire. food costs more, energy costs more, everything costs more.

Ah, so do houses. Suppose that was probably our fault?

Today

‘Something must be done!’ I really hate it when people say that. What? What must be done? Yes, Russia’s war in Ukraine and the pandemic have made things much, much worse, but this mess is also the direct result of us failing to answer that question.

Inflation is the price we are paying for 15 years of kicking the debt can down the road. That’s why the Bank of England is inflicting rising interest rates on us now. It’s why they’ve largely stopped printing money.

Higher taxes mean we take home less money. Higher interest rates make it unaffordable to spend more money than we earn.

Of course it hurts. We have less to spend and prices go down because they have to – that’s the theory, anyway.

In practice though, we aren’t talking about statistical models. We’re talking about people – grandparents, children, the sick and those who care for them.

The country must take the medicine if it is to get better. Just don’t expect to get well for another four or five years.

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From the 1970s to now, what has gone wrong, and how can we get onto the right path?