Should Labour adopt the four per cent inflation policy?

Controversial ideas of the past are becoming consensus of the present.

A 1998 proposal by Paul Krugman that the western world should target inflation at four per cent rather than two per cent, has got the backing of the IMF (pdf). The intention would be to erode government debt, and to give policy makers a more flexible tool in the future, rather than resorting to quantitative easing (QE).

In our battle to combat inflation, we fought for it to be as close to zero as it can be without grinding growth out. Two per cent seemed to be that point. However, now that we’ve got that control, we don’t have to keep it so low.

In 2007, if inflation had been at four per cent instead of two per cent, then interest rates would have been seven per cent rather than five per cent, and the Bank of England would have had more room to cut when crisis struck. In other words, they wouldn’t have needed to go beyond zero to engage QE.

Some people might say that since we’ve finally beaten inflation, it’s not wise to bring it back? But it’s not inflation that causes problems, it’s unpredictable inflation that we fear. If we had a high rate of say 10 per cent, but steady, year in year out, then companies and people would be able to plan around it. But if we didn’t know whether inflation will be 5 per cent or 15 per cent, then how much should a bank charge for a loan? Can a company calculate the profit they’ll make, if they don’t know how much the money will be worth. So four per cent is fine, as long as it’s steady.

The other benefit of running a higher inflation rate is that we would erode our debt much faster. If the interest on a gilt is four per cent, then two per cent inflation would cancel it out. If your mortgage were two per cent, then four per cent inflation would leave you with a negative real interest rate of minus two per cent.

Krugman accepts that this would be rewarding debtors for their past excesses, but argues that “economics is not a morality play.” Is he right to dismiss morality so easily? Surely modern day politicians make their living from telling bankers they are not good citizens. Is it appropriate to dismiss investors with the refrain of caveat emptor, buyer beware?

It’s worth remembering that no investor complained when QE was buying up that same debt for higher than it’s real value. Besides, if investors had feared inflation, they could have bought index linked gilts. These track inflation and rise in value proportionately. They make up only about 10 per cent of gilts. So when it comes to the other 90 per cent, I contend that ethical arguments are insufficient to reject the policy.

The big question is whether policy could easily switch inflation from two to four. Much of the cause of inflation is expectation. In the '70s, inflation was high because trade unions made demands for wage rises on the expected future inflation rate. These rises then caused inflation to rise to the same level, and unions would demand a rise again. It was self-perpetuating.

Conversely, when Gordon Brown made the Bank of England independent, inflation markedly dropped off and stayed low. This wasn’t due to a policy of the bank, but due to the confidence inspired by it’s independence.

Should a policy of increased inflation be kept a secret? My experience of politics is that if you have something controversial to say, then be confident, say it forcefully, then stick around to face down your critics. The public aren’t experts on economics. They will make judgements on the confidence of the advocate and the reaction of pundits.

On the question of whether the markets will react badly to such a policy, I think that depends on the timing. Right now, with no demand in the economy, the market wouldn’t react badly because they have nowhere else to go. These days most savers keep their money on deposit with an interest rate lower than inflation. They are losing money in preference to the uncertainty elsewhere.

There are few safe havens in today’s investment world, partly due to the bad policy imposed by politicians such as David Cameron and Angela Merkel. When considering our economic policy for a future government, we must recognise that controversial ideas of the past are becoming consensus of the present, and deserve our serious consideration as policy for the future.

The Bank of England. Photograph: Getty Images

Dan McCurry  is a photographer in east London and a Labour activist. He is a former chair of the Bow Labour Party.

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Levi Bellfield, Milly Dowler and the story of men’s violence against women and girls

Before she was so inextricably connected to the phone hacking scandal, Milly Dowler was one of many women maimed and killed by a violent man.

The name Milly Dowler has meant phone hacking since July 2011. The month before that, Levi Bellfield (already imprisoned for the murders of Marsha McDonnell and Amelie Delagrange, and the attempted murder of Kate Sheedy) had been convicted of killing her, nine years after her death. But almost immediately, she became the centrepiece of Nick Davies’s investigations into Fleet Street “dark arts”, when it was revealed that News of the World journalists had accessed her voicemail during the search for her.

Suddenly her peers were not McDonnell, Delagrange and Sheedy, but Hugh Grant, Leslie Ash, Sadie Frost, Jude Law. People she could only have known from TV, now her neighbours in newsprint. Victims of a common crime. She had attained a kind of awful fame, and remains much better known than McDonnell, Delagrange and Sheedy.

There is a reason for that: with Milly Dowler, there was hope of finding her alive. Weeks of it, the awful hope of not knowing, the dull months of probability weighing down, until finally, in September 2002, the body. McDonnell, Delagrange and Sheedy were attacked in public places and found before they were missed. It is not such an interesting story as the schoolgirl who vanishes from a street in daylight. Once there were some women, who were killed and maimed by a man. The end.

Even now that Bellfield has confessed to kidnapping, raping and killing Milly, it seems that some people would like to tell any story other than the one about the man who kidnaps, rapes, kills and maims girls and women. There is speculation about what could have made him the kind of monster he is. There must be some cause, and maybe that cause is female.

Detective Chief Inspector Colin Sutton (who worked on the McDonnell and Delagrange murders) has said insinuatingly that Bellfield “dotes on his mother and her on him. It's a troubling relationship.” But it was not Bellfield’s mother who kidnapped, raped, killed and maimed girls and women, of course. He did that, on his own, although he is not the first male killer to be extended the courtesy of blaming his female relatives.

Coverage of the Yorkshire Ripper accused his wife Sonia of driving him to murder. “I think when Sutcliffe attacked his 20 victims, he was attacking his wife 20 times in his head,” said a detective quoted in the Mirror, as if the crimes were not Sutcliffe’s responsibility but Sonia’s for dodging the violence properly due to her. Lady Lucan has been successfully cast by Lucan’s friends as “a nightmare” in order to foster sympathy for him – even though he systematically tried to drive her mad before he tried to kill her, and did kill their children’s nanny, Sandra Rivett. Cherchez la femme. Cherchez la mom.

I know little about Bellfield’s relationship with his mother, but one of his exes spoke about him earlier this year. Jo Colling told how he had terrorised her while they were together, and stalked her after she left. “When I knew he was with another woman and not coming home it was a relief, but now I know what he was capable of, I feel guilty,” she said. “I did get an injunction against him, but it only made him even angrier.”

Colling fears that she could have prevented Bellfield’s murders by going to the police with her suspicions earlier; but since the police couldn’t even protect her, it is hard to see what difference this could have made, besides exposing herself further to Bellfield’s rage. Once there was a woman who was raped, beaten and stalked by the man she lived with. The end. This is a dull story too: Colling’s victimisation is only considered worth telling because the man who victimised her also killed Milly Dowler. Apparently the torture of a woman is only really notable when the man who does it has committed an even more newsworthy crime.

Throughout his engagements with the legal system, Bellfield seems to have contrived to inflate his own importance. Excruciatingly, he withheld his confession to murdering Milly until last year, leaving her family in an agony of unknowing – and then drew the process out even further by implicating an accomplice, who turned out to have nothing at all to do with the crime. He appears to have made the performance into another way to exercise control over women, insisting that he would only speak to female officers about what he did to Milly.

It is good that there are answers for the Dowler family; it is terrible that getting them let Bellfield play at one more round of coercions. And for the rest of us, what does this new information tell us that shouldn’t already be obvious? The story of men’s violence against girls and women is too routine to catch our attention most of the time. One woman killed by a man every 2.9 days in the UK. 88,106 sexual offences in a year.

Once there were some girls and women, who were tortured, stalked, kidnapped, raped, killed and maimed by a man. Dowler, McDonnell, Delagrange, Sheedy, Colling. More, if new investigations lead to new convictions, as police think likely. All those girls and women, all victims of Levi Bellfield, all victims of a common crime that will not end until we pull the pieces together, and realise that the torture, the stalking, the kidnaps, the rapes, the killing and the maiming – all of them are connected by the same vicious logic of gender. Then, and only then, will be able to tell a different story. Then we will have a beginning.

Sarah Ditum is a journalist who writes regularly for the Guardian, New Statesman and others. Her website is here.