Letter: Afraid to let go of the status quo

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The Independent Online
Sir: The case for fixing the pound in the ERM was that it would not only reduce inflation, but break the wage-price spiral, as it already had in all the different countries whose currencies were fixed in 1979.

Now that not only inflation, but wage awards, too, are down to 4 per cent, Professor Wood (letter, 31 August) tells us that that is nothing but a depressed economy.

But, since the wage explosion after the Callaghan devaluation in 1967, wage awards have risen despite rising unemployment, breaking the previous pattern, know as the 'Philips curve'. Even with more than three million unemployed in the Eighties, wage awards rose by a steady 7 per cent to 9 per cent - even when in the mid-Eighties price inflation was at 4 per cent. The new factor is the hard currency.

If Professor Woods wants us to live in the economic conditions of Brazil or Thailand, or to live like a Third World economy under the tender care of the IMF, that is up to him. But I doubt whether it is the wish of the British people.

Yours faithfully,


MEP for Cambridge and North Bedfordshire (Con)

St Petersburg,


1 September