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The return of macroeconomics

The monetary and fiscal framework created in Britain after 1992 has enjoyed a long run of success. But with tougher times ahead, critics are wondering how much of that success is down to the new rules and how much to benign global conditions

By Graham Bowley   March 2006

Shortly after leaving university, I joined the treasury. This was in the early 1990s, when the government still controlled all the levers of British economic policy, including interest rates. One afternoon, one of Norman Lamont’s young advisers—it might even have been David Cameron—stuck his head around our office door and announced: “They’ve done it!” The Conservative government had ordered a cut in interest rates.

Monetary policy then was down to the whims of the chancellor. Everyone knew it was determined as much by the political calendar as by the economic cycle. This approach came unstuck on 16th September 1992. On…

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