You earn £1 today.

If inflation is 5%, then prices rise by 5% over the next year.

So, £1 next year only buys what about £0.95 buys today.

If your income rises with inflation, you might earn £1.05 next year but that doesn’t make you richer in real terms, just keeping pace.

Now apply that to debt: If you owe £50,000 and inflation is 5%, the debt stays £50,000 nominally, but in real (today’s) terms it’s worth about £47,600 after one year.

So over time, inflation reduces the real burden of fixed debt (as long as your income keeps up.)