Letter: Inflation, output and unemployment

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The Independent Online
Sir: Gavyn Davies (Economic Commentary, 11 January) contrasts the Eighties 'consensus' that economic policy should be aimed solely at the control of inflation by monetary means with the earlier view that output and unemployment mattered as much as inflation. He notes that there is little sign on the Continent of the demise of the theory that the monetary control of inflation is a technical matter to be delegated to an 'auto-pilot' and freed from 'vulgar political dispute'.

Mr Davies does not mention Maastricht, but it would be fair to say that Stage III of European Monetary Union represents the codification of that theory.

Mr Davies also notes that John Major may now be prepared to move away from the Eighties consensus and make the regeneration of output growth the prime target. The article concludes that the way is now open again for a real macro-economic debate between British political parties.

Official Labour policy supports Stage III of EMU and Maastricht; it also condemns Mr Major's opt- out from Stage III. If there is such a debate, Labour will find itself arguing for the control of inflation, notwithstanding the effect on output and jobs, while the Conservatives give at least equal weight to all three. Is the Labour Party once again about to entrap itself in the policies of yesterday, long after those policies have ceased to be fashionable?

Yours faithfully,

DENZIL DAVIES

MP for Llanelli (Lab)

House of Commons

London, SW1

11 January

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