Fifth, and more certainly, the Bank of England is going to interpret the scheme as guaranteeing long-term higher prices and so will keep increasing interest rates to try to eliminate the impact of government policy. The conflicts created by non-joined-up economic thinking will be considerable. More relevantly, the impact on households will be considerable. As I mentioned recently, a Bank of England rate increase from the current 1.75% to 4% will increase average mortgage costs by maybe £600 a month – or more than £7,000 a year.
And, of course, just imagine how high interest rates would go if the other solution was tried, just print money to pay for everything!