What causes inflation?
An increase in the supply of money relative to productivity.
SO… If a government pumps a bunch of money into an economy but the productivity of that economy doesn’t grow, you get inflation.
Stay with me here…

The UK economy has been hovering between £2.1T and £2.2T since 2016.
During the pandemic we pumped £180B in. And now we are putting another £150B in for the energy crisis.
If the government injects £330B into an economy that is stuck at £2.2T what happens?

Well £330B is 15% of the UK economy.
Furlough did not create a new asset. Energy relief doesn’t create a new asset. So we will increase monetary supply without a corresponding increase in productivity.
Mathematically, we would expect to see 15% inflation. But it get’s worse..

When you pump money into a system it goes to people who have products and services that can scale up - corporations, established entrepreneurs and asset owners.
You make the rich a lot richer. You widen inequality. You create deep divisions in society.

The governments plan to do good and save people from rising energy costs will ultimately cause a very unequal society where the poor can’t afford to live and the wealthy inflate their assets.