The energy price surge caused by war in the Middle East has sent shockwaves through Westminster. It has pushed up inflation and the cost of borrowing, causing panic in the cabinet and the recognition that government intervention could be needed on a vast scale to support the cost of living.

The Prime Minister told a private audience: ‘The assumption that the growth of the developed countries can proceed steadily on the basis of cheap energy has been shattered almost overnight.’ He further observed: ‘The problem is not simply one of inflation. It is the whole structure of the economy.’

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In the Treasury there is something approaching a siege mentality. The Chancellor has ‘to spend [her] time firefighting’. When considering the realities of the UK’s economic situation, the guardian of the public finances said: ‘My predecessor left me an economy on the brink of catastrophe; my task was continually obstructed by events outside Britain over which I had no control… The Chancellor of the Exchequer’s is a lonely job, particularly when he is obliged to disappoint the hopes of his party. Without the support of the prime minister it is impossible.’

The ‘he’ is the giveaway. Those were the words of Denis Healey, who inherited a gargantuan financial mess the year after the Opec price shock of 1973 and whose memoir is one of the best by a leading politician. ‘We’re into Opec 1973 territory now,’ remarks one cabinet minister.

The Cobra emergency committee met on Monday to make plans to deal with the impact of an........

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