When a government pinches a key opposition policy it has spent months deriding, and which goes directly against its ideology, you know something pretty big is going on. The Tories’ screeching U-turn over a windfall tax on energy companies in order to fund payments to “ease” the cost of living crisis is in part a typically crude attempt to change the subject from Partygate. But it is also a more revealing signal: that the government has, belatedly, become very worried about the politics of inflation. It is right to be. For a lot of voters, many of them Tories, high inflation is very frightening. Savings shrivel. Pay rises are rarely enough. Investing safely seems impossible. State benefits are even less sufficient than usual. Luxuries, small treats and even essentials become unaffordable. The whole process of personal enrichment promised by capitalism goes into reverse. The solidity of money – the basis for so much of our lives – is revealed as an illusion. It becomes clear that money can decay, like everything else. High inflation makes people angry. The last time Britain had a sustained period of it, from the early 1970s to the early 1980s, rightwing politicians, commentators and voters often described it as a disease, and claimed it was caused by trade unionists’ greed and the profligacy of Labour governments. It was seen as a sign of decadence, which might lead to a national collapse. “Inflation is a great moral evil,” said Geoffrey Howe, Margaret Thatcher’s severe first chancellor, in 1982. “Nations which lose confidence in their currency lose confidence in themselves.” The UK currently has the worst inflation of any G7 nation. Further huge increases in food and fuel prices are seen as inevitable, such as the £800 rise in the energy price cap this October, which the energy regulator Ofgem predicted this week. “It’s hard to overstate the scale of the cost of living crisis coming,” warned the Resolution Foundation in March. The usually sober thinktank foresaw “the highest inflation in 40 years and the worst income squeeze on record”. This shock is beginning to be felt by a country that is much more unequal than in the 1970s, and which has many more vulnerable people. In 1975, about 13% of UK residents were living in relative poverty. The figure is now about 22% – and our population is a fifth larger. Unlike in the 1970s, average wages have already been stagnant or falling for over a decade. The climate crisis and commodity speculators are making surges in food prices more frequent. And the capacity of the state to respond to social emergencies has been weakened by 12 years of austerity. High inflation may be familiar to older Britons, but its return could lead a fragile and divided country into uncharted territory. What might be the politics of our new age of inflation? The fact that the government’s new cost of living plan is its third in four months suggests that panic and improvisation will be the Conservative response. The latest measures are generous – up to £1,200 will go to the poorest households – but they may not be generous enough. This year’s rise in the energy price cap is likely to be £1,500. And the price of energy is hardly the only thing that is going up. Nor do many forecasters expect inflation to fall quickly. We should probably expect further special announcements from Rishi Sunak. That this time he had to rely so heavily on an idea from Labour suggests that the Tories are running out of inflation remedies. That their windfall tax – shamefacedly disguised as a “temporary targeted energy profits levy” – is more ambitious than Labour’s also suggests that there may now be a bidding war between the parties over cost of living policies. But they may struggle to keep up with the crisis regardless. In an inflationary era, social conditions can change fast. At the peak of the German hyperinflation in the 1920s, the price of a cup of coffee sometimes doubled in the time it took to drink it. There was panic-buying, hoarding and an increase in theft and prostitution. Politics became more polarised, and scapegoats were identified: immigrants, inadequate politicians, profiteering companies. Much of the energy of politics moved out of parliament and on to the streets, into protests, strikes and riots. The UK is not anywhere near as feverish, yet, but it is showing some of the same symptoms. This week the RMT union voted for the first national rail strike in decades, partly because employers have “refused to keep staff pay in line with… soaring living costs”. Last week, the chief inspector of constabulary said police officers should use “discretion” when deciding whether to prosecute people who steal food. But it is the impact of inflation on those used to being comfortably off that often makes it most politically disruptive. More than austerity and the slump in wages since 2010, it threatens people with assets – the voters on whom the Conservatives depend. In the inflationary 1970s, they formed aggressive, often very rightwing lobby groups such as the Middle Class Association, campaigned against “spiteful” tax increases and the “disproportionate suffering” that price rises imposed on business owners and professionals, and ultimately helped radicalise the Conservative party. Nowadays, many middle class people are protected against inflation, to an extent, by the high value of their properties. But if the collapse in real incomes also causes house prices to fall, then the wrath of the middle classes will return. And the old scapegoats for inflation are less available. The unions are smaller and weaker now. Labour is not in government. There is greed and decadence in this country, but centred on Johnson’s Downing Street and his favoured corporate interests. Inflation eats away the status quo, and today’s status quo is thoroughly Tory. The process isn’t always fast. There were years of surging prices in the 1970s before there was a change of government. If the current crisis lasts, it’s possible to envisage a populist, anti-inflation party forming and calling for price caps on much more than energy. But our electoral system would limit its chances. Meanwhile, the disappearance of physical cash from our lives, accelerated by the pandemic, makes it easier to avoid thinking about how much our money is shrinking. As the sometimes docile years following the financial crisis demonstrated, our country often reacts to economic punishment less dramatically than doomy forecasters imagine. Yet it does react in the end. After the financial crisis came the fall of Gordon Brown’s government, the 2011 riots, Corbynism and Brexit. By the time the cost of living crisis is over, this could be a different country. Andy Beckett is a Guardian columnist