When I discussed the folly of this approach with Alfred Sherman, the CPS's policy director, his view was that savers should be protected from inflation by the rise in interest rates. I  pointed out that if interest rates remained at that level for long, savers wouldn't have any dividends — the source of their and pensioners' wealth — because the companies simply wouldn't be there to pay them. 

As predicted, Lansing Bagnall declined, and was taken over and closed down — an unnecessary industrial tragedy which was to prove just one of thousands.

The feedback I was getting was that Margaret Thatcher instinctively felt that interest rates were far too high, but was unable to convince Howe and the Treasury team. Her intuitive feeling, which, here as in so many things, was justified by events, was not then fully recognised. (Alan Walters, who came back from the US to advise her in 1981, also believed that interest rates had been kept unduly high). 

The unemployment caused by industrial bankruptcies, caused in turn by an over-valued pound (the exchange rate rose by more than 33 per cent between 1977 and 1980) was a legacy of Howe's single-minded approach to the problem; he felt that there was no alternative but the medicine of monetarism. It was neither the fault of Mrs Thatcher nor Sir Keith Joseph, who felt powerless. 

Attempting to control inflation through a monetary policy based purely on interest rates sowed the seeds of the decline in British industry over 30 years, throughout which the pound was overvalued most of the time. The American Fed, which has a policy of not only trying to control inflation but sustaining employment, is perhaps a better concept on which to run an economy. Our own monetary policy is now being run on the same lines, in practice if not in theory. 

It has been argued that one of Howe's great successes was to let the pound float and be freely adjusted by market forces. But this is also a myth, as in reality the value of the pound is significantly influenced by the bank rate. If this contributes to keeping the value of sterling well above purchasing parity, then businesses — whose profit margin is seldom much above 10 per cent — inevitably become uncompetitive. 

For a trading nation like Britain to ignore the value at which it trades —the value of sterling — can now be seen as an error of the first magnitude. It has decimated our industrial framework, given us a massive imbalance of trade and huge international borrowings, all of which have to be serviced by an ever-increasing burden of general taxation. 

Some argue that we should accept that in modern nations manufacturing industry is dead and we should rely on the growth of the service sector. But the UK, with its inventive and entrepreneurial background and extraordinary tradition of scientific innovation, should be perfectly capable of holding its own with Switzerland, Japan or indeed Germany, who have thriving industrial sectors and substantial trade surpluses. 

The folly of an economic policy based on interest rates and money supply alone is being increasingly recognised. Sadly, manufacturing capacity cannot be replaced overnight, nor the skills that go with it. But a dawning recognition of the problem, across the political spectrum —catalysed perhaps by the development of cheap shale energy — could, with the pound valued at a sensible level, reactivate our economy and the jobs that go with it.