Too Many Targets, 1977–79

Abstract

The UK entered 1977 with a hotchpotch of economic targets. There was the broad money supply target, reconstituted in 1975 as an adjunct to incomes policy, and announced in 1976 to placate the markets. There were the Public Sector Borrowing Requirement (PSBR) and Domestic Credit Expansion (DCE) ceilings, agreed with the International Monetary Fund (IMF), and published in the December 1976 Letter of Intent. There was an informal agreement with the Fund that sterling would be held down to encourage the balance of payments. There also emerged a Bank target for the foreign exchange reserves. But at the heart of the Labour government’s economic policy in 1977 was the target of lower inflation. While monetary and fiscal policy would play supporting roles, this was to be achieved primarily through incomes policy.

I spent approximately 90 per cent of my time on pay; rather more than 5 per cent on money and less than 5 per cent — 2 per cent — on tax.

Sir Geoffrey Littler, former Second Permanent Secretary to the Treasury, 2005.¹