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Eagle Eye

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Ben Chu: Does David Cameron understand what inflation does?

Posted by Eagle Eye
  • Wednesday, 11 November 2009 at 01:25 pm

For someone who professes to be so worried about inflation David Cameron seems bizarrely ignorant about what its effects are. In his speech on poverty yesterday the Tory leader said:

"Since 1997 the Government has spent £473 billion on welfare payments alone - that's as big as our whole economy in 1988."

Yes, but the purchasing power of our British pounds has fallen significantly in the past two decades thanks to inflation. Adjusted for inflation GDP in 1988 was around £900bn in today's prices.

Cameron's comparison is about as relevant as noting that £1m in today's money would have bought you most of Mayfair three centuries ago. Interesting, but meaningless.