Politics always comes down to “the economy, stupid”, and the next election will surely be fought on the basis of which party is best placed to put money in people’s pockets.
Three of Rishi Sunak’s five pledges boil down to economic issues: he wants to grow GDP, reduce the level of Government debt and – most urgently – cut inflation at least by half.
Wednesday’s shock announcement that inflation had risen in February, rather than falling, may have got buried in an onslaught of Westminster drama including the Boris Johnson hearing, a big Brexit vote and the release of the Prime Minister’s tax returns.
But that does not diminish its importance: if the rate of price rises continues to climb, or falls more slowly than forecast, then Britain’s living standards will deteriorate and the Government will get the blame.
Persistently high inflation explains why on Thursday the Bank of England decided to raise interest rates yet again, despite the risk of further destabilising a banking sector that has shown itself to be worryingly fragile.
That decision was warmly welcomed inside the Treasury. Jeremy Hunt continues to regard the fight against inflation as his top priority, reasoning that unless prices come under control his other goals will be impossible to deliver.
The Chancellor is widely expected to offer tax cuts before the next general election, to fire up the Tory troops and show the party has a long-term plan to retreat from the current record high tax burden.
But speculation that tax cuts could come earlier than that, for example at the Autumn Statement this year, may prove wide of the mark. Mr Hunt wants to avoid the nightmare scenario of being accused of stoking inflation himself through his policy decision, as was said of his predecessor Kwasi Kwarteng.
Higher spending looks more likely than lower taxes in the short term: the Treasury may have to commit more cash to provide public sector pay increases, and other spending promises such as the NHS workforce plan are likely to mount up in the coming months.
Internal Conservative politics mean that Mr Hunt and Mr Sunak will have to announce some tax cuts at the next Budget, even if it looks unlikely that they would move before then. And if the rate of inflation has fallen below 3 per cent by the end of this year, as forecast by the Office for Budget Responsibility, that will be easier.
There is a huge downside to the action being taken to curb price rises, however. Every mortgage borrower in the country feels the pain of interest rate hikes, and many of them blame the Conservatives. Ministers are anxious to see those hikes go into reverse at some point: if they do not, the Government’s economic balancing act may topple over come the election.