Our forecasts, like those of the Treasury published in the Autumn Statement, are based on the assumption that oil prices will fall back next year, as the crisis in the Gulf is resolved. We describe briefly below what might be the consequences, for the world economy and for Britain, if oil prices were to be $45 a barrel for the foreseeable future, as might happen as a result of a long war.

In Chapter I our main forecasts assume the continuation of existing economic policies, which we interpret as being consistent with a gradual move towards economic and monetary union. In Chapter III we consider some of the alternative policy options which might be considered if the Labour Party wins the next election.