Arguments over the minutiae of potential effects of
government spending cuts are likely to become increasingly commonplace with the comprehensive
spending review to be completed next month.
Again, the
argument is not that interest rates are irrelevant, or that there is no relationship between total
government liabilities and inflation (though the tightest relationship is between
government spending growth, regardless of how it is financed, and inflation - particularly
over horizons of 4 - 5 years).