So, British gas announced its intention to raise gas prices by 35 per cent and electricity by 9 per cent. That will hurt. Meanwhile, the collapse in the price of oil seemed to come to a halt yesterday, and go back into an unfortunate reverse – as news that US stockpiles of oil had fallen led to a sharp $5 a barrel jump. So that is it then, inflation is just taking off. Yet, news from Incomes Data Services this morning revealed a fall in pay rises in the three months to June. The period saw average pay increases of 3.5 per cent, from 3.6 per cent during the three months to May. We keep hearing about strikes making a comeback in the public sector, and how a wage inflation spiral could have its origin in the government controlled arena, at a time when the Gordon Brown regime dare not risk a confrontation. Yet the Incomes Data Services report revealed that the public sector received pay deals worth just 2.7 per cent during the period. According to a report from KPMG, the number of firms planning to make job cuts has almost doubled in the last three months. KPMG’s survey of senior executives in both public and private sector organisations indicates that more than half (53 per cent) now plan to reduce their staff headcount over the coming months, with a similar number (52 per cent) planning to implement recruitment freezes. Back in March 2008 when the same organisations were questioned for KPMG by Opinion Leader Research, only 29 per cent were looking at job cuts as a cost-saving measure. It seems highly unlikely that in this environment of job uncertainty, wage inflation will take off. In fact, as the credit crunch deepens, wage deflation seems more likely to go negative. In fact, there has already been some anecdotal evidence to suggest some workers are being put under pressure to accept pay cuts. They are having to choose between pay cuts or losing their job altogether. Yet, in yesterday’s FT, Kenneth Rogoff, a respected economist if ever there was one, for Mr Rogoff is a former chief economist at the IMF and now Professor of Economics at Harvard, banged the anti inflation drums. He argued that the current idea of bailing out banks, and slashing interest rates to stimulate the economy, is flawed. “The world can not grow its way out of this slowdown” went the headline to his piece, and he said: “governments in every corner of the world showed themselves perfectly capable of achieving very high rates of inflation long before they had the assistance of modern unions.” So what we have then is quite a dichotomy.