^{note (1) page 4} Official estimates of all the elements in the national accounts and the balance of payments for the last quarter of the year are not yet available. Discussion of the fourth quarter's and the year's figures is based on NIESR estimates.

^{note (2) page 4} Not all of this increased debt can be assumed to underpin an equivalent rise in consumer spending, partly because of the coverage of the figures which (certainly in the case of hire purchase debt) embrace the business as well as the personal sector, and partly because some of the increased debt will be associated with a rearrangement of individuals' financial positions, making no contribution to extra expenditure. A weighted sum of the increase in hire purchase debt and bank lending to the personal sector (taking 80 per cent of each) is used to estimate the ‘credit effect’ given in table 4, which is shown to have swung from -£24 million in the second quarter to +£62 million in the fourth.

^{note (1) page 5} National Institute Economic Review No. 39, February 1967, pages 34-36, and table 16, page 35.

^{note (2) page 5} This was the indication of the Inquiry of November- December 1966. The May 1967 Inquiry suggested a fall of 8-9 per cent.

^{note (3) page 5} In the National Institute Economic Review No. 42, November 1967, page 17, we gave a tentative estimate of the loss of exports in the second half of the year, due to the strikes, of about £55 million in current prices. The publication since then of the trade figures for November and December suggests that this estimate was much too low; exports fell again between October and November and when they rose in December recovered only to the levels of the second quarter of the year. Our previous estimate assumed that there would be a much faster clearing of strike-bound exports in these two months than could evidently have been the case. Probably, the value of exports held up by the strikes in the second half of the year should be put down at something like £125 million in current prices.

^{note (1) page 6} Formal statements, in equation form, of these relation ships were discussed in the National Institute Economic Review No. 29, August 1964, pages 26-30 : W. A. H. Godley and J. R. Shepherd ‘Long-term growth and short-term policy’.

^{note (2) page 6} That is, the number of registered wholly unemployed has risen less quickly than would normally be expected, given the fall in employment. See the National Institute Economic Review, No. 42, November 1967, page 13, footnote (2).

^{note (1) page 7} The National Institute Economic Review No. 39, February 1967, page 13.

^{note (1) page 8} This at any rate was the forecast given in the National Institute Economic Review, No. 39, February 1967, page 11.

^{note (2) page 8} See the National Institute Economic Review, No. 40, May 1967, page 7.

^{note (3) page 8} The total effect of these measures, and the concomitant increase in bank advances, may have added something like 1 per cent to consumption spending in the second half of 1967 and they appeared likely to raise consumption expenditure in 1968 by some 1 1/2 per cent. Some calculations on this point were set out in the National Institute Economic Review No. 42, November 1967, pages 9 and 11, table 7. (There was a mistake in this table in the estimate given of the effect of increased family allowances; the quarterly addition to consumers' expenditure resulting from the increase in family allowances starting with the fourth quarter of 1967 should have read in £ million, 1958 prices, and seasonally adjusted : +1, +2, +10, +17, and +18.)

^{note (4) page 8} We elaborated this point in issues of this Review last year. See, for example, the National Institute Economic Review No. 39, February 1967, pages 6 and 8, and No. 40, May 1967, page 7.

^{note (1) page 9} Thus, forecasts in the National Institute Economic Review of the growth in gross national product of industrial countries between 1966 and 1967 became progressively less optimistic with each issue : in the November 1966 issue it had been put at 4.2 per cent; in February 1967, this was revised down to 3.6 per cent. In May it was put at 3.3 per cent; in August at 2.8. The process of downward revision only stopped with the November 1967 issue in which a figure of 2.9 per cent was suggested.

^{note (2) page 9} See the National Economic Institute Review No. 39, February 1967, pages 16-17, and table 6.

^{note (3) page 9} The actual fall in share was 1 per cent. Isolation of the underlying trend requires a correction for devaluation. The UK share is expressed as a proportion of a dollar value total and without adjustment would be biassed downwards : the unit dollar values of exports fell with devaluation but there could hardly have been a compensating volume-response in the last few weeks of 1967.

^{note (4) page 9} See G. A. Renton; ‘Forecasting British exports of manufactures to industrial countries’, National Institute Economic Review No. 42, November 1967, pages 35-48.

^{note (5) page 9} The Chancellor noted that, discounting the effects of the purchase of US military aircraft and the removal of the import surcharge, ‘the increase in imports [in calendar 1967] is unlikely to be large if, as I expect, domestic output grows moderately and the pressure on resources is not high’. (House of Commons Debates, Vol. 720, col. 994.)

^{note (1) page 10} The relationship referred to is cited as equation (1) in the National Institute Economic Review No. 42, November 1967, page 53, in the special article by I. G. Black, J. E. Kidgell and G. F. Ray : ‘Forecasting imports : a re-examination’, pages 52-57.

^{note (2) page 10} Official statistics of total stockbuilding—the stock figures employed in the equation cited in the footnote above- certainly do not suggest abnormally high additions to stocks in the second and third quarters of the year. Indeed, according to the latest expenditure estimates, there was a fall in stockbuilding in the third quarter of the year. However, our own estimates of the stock change in mainly imported commodities (Statistical Appendix, table 15) suggest quite a high level of stockbuilding in these goods during the first three quarters of the year.

^{note (3) page 10} Equation (3) page 53, in the special article mentioned in the footnote above.

^{note (4) page 10} There have since been some second thoughts on this, following the suggestion that export rebates and import taxes might be introduced by the Administration in the United States.

^{note (1) page 11} ‘I think that we can safely allow a rate of expansion of roughly 4 per cent a year during 1968 and 1969.’ Chancellor of the Exchequer, Hansard, col. 1788, 17 January 1968. This would produce about a 3 per cent increase in output, com paring the two full years 1967 and 1968.

^{note (1) page 13} This is the sum total of investment, at constant prices, of ‘mainly public industries and services’. Investment of the steel industry is excluded throughout.

^{note (1) page 14} The high estimate of stockbuilding in the fourth quarter consists largely of stocks of goods for export held up by the dock strike; they may or may not be recorded in the official figures. There is a compensatory low figure in the first half of 1968 in table 2.

^{note (2) page 14} Some special payments and receipts for the carriage of oil to other countries after the closure of the Suez Canal, which we had previously assumed were inflating the figures for imports and exports of services by equal amounts, are in fact excluded (so far as possible) from both sides of the account.

^{note (1) page 15} National Institute Economic Review, No. 42, November 1967, table 5, page 8. The 1967 deficit is of course much worse now than was estimated in November-£450 million now, as against £300 million then.

^{note (1) page 17} To avoid the complications of ‘second-round effects’, the income and employment assumptions in this table have been linked to a 4 per cent growth rate, rather than to the higher growth rate (of around 5 1/2 per cent) which would have occurred in the absence of restraint : that is, they already take account of the multiplier effects of a lower level of con sumers' expenditure. Consequently, in considering the effect of tax changes, the multiplier effects can be ignored, and the direct effect on consumers' expenditure only can be taken.

^{note (2) page 17} It is true that table 4 does not in fact show what con sumers' expenditure would have done if there were no further policy measures, since it does not allow for the multiplier effect on employment and incomes of the difference between this consumers' expenditure series and the one in table 2. However, the points made here about the forces which would in any case slow down the rise in consumers' expenditure would still be valid even after allowing for multiplier effects.

^{note (3) page 17} These are the ‘first-round’ reductions, without allowing for multiplier effects.

^{note (1) page 18} That is, allowing for the fact that the measures would fall partly on savings. A 10 per cent saving offset was assumed.

^{note (1) page 19} National Institute Economic Review No. 30, November 1964.

^{note (2) page 19} The labour force estimates are those provided in the Ministry of Labour Gazette November 1966, but adjusted for the recent postponement in the raising of the school- leaving age. The Ministry of Labour's estimates assume a continued rise in activity rates.

^{note (3) page 19} To support this, it is reasonable to assume that the share of output devoted to productive investment, particularly in manufacturing industry, will rise. But there is also the sug gestion that underlying productivity may already have risen, more quickly than usual, in the present cycle (see page 6)-a movement which may be continued in the future. Certainly, if the merger movement and the spread of productivity bargaining have been responsible, a further rise can be expected in the future—but it is impossible to say precisely what impact these developments have had on productivity, or what effects they will produce in the future.

^{note (4) page 19} W. Beckerman and Associates : The British Economy in 1975.

^{note (5) page 19} Cf. W. Beckerman and Associates : op. cit., page 72, footnote (1) ‘The concept of the growth hypothesis adopted by the NEDC appears to be the same as that underlying the present study judging by Mr. Selwyn Lloyd's budget statement of 9 April 1962 that “What the Council must do is to set an ambitious but realistic target figure’, House of Commons Parliamentary Debates (Hansard), vol. 657, col. 569. ‘In terms of this characterization, the 3 per cent figure we suggest for growth in the medium-term could be described as ‘more realistic and less ambitious’.

^{note (1) page 20} This is a rough compromise of the two alternative explanations of the rise in observed productivity. If the rise were entirely due to a speedier adjustment of labour require ments by employers, underlying productivity being unchanged, then the reduction in unemployment from the current level of 2.3 per cent to 1.5 per cent would be associated with an increase in output of only some 1.4 per cent. But if there has been an increase in underlying productivity sufficient to explain the rise in observed levels, then the output increase might be as much as 2.5 per cent.

^{note (2) page 20} The Chancellor of the Exchequer referred to the need to repay foreign debt as part of the backing for his statement that ‘… we need to put about £1,000 million in the balance of payments to get the turn round that we need …’ and in the same context stated that the balance of payments results for 1968 ‘… must lead on to a substantial and continuing surplus in 1969 and subsequent years. The surplus that we need to work towards is of the order of £500 million.’ (House of Commons Debates Vol. 743, col. 1788.)

^{note (1) page 21} The incremental capital/output ratio implied by the assumption of a 10 1/4 per cent share in GDP going to private productive investment is very slightly higher than the average for this ratio observed in the decade 1955-65.

^{note (1) page 22} A similar picture, with respect to the movement of the share, emerges if it is expressed as the ratio of consumers' expenditure to GDP at factor cost, whether the adjustment to factor cost (net indirect taxes) is wholly deducted from consumers' expenditure or whether a proportionate attribution of the factor cost adjustment is attempted on the basis of the input-output tables.

^{note (2) page 22} On the evidence of earlier years, at least as far back as 1957, the relative position of the UK would be the same as indicated in table 8, and would be unaffected by making the rough adjustment for the incidence of indirect taxes, of attributing them wholly to private consumption (although the ranking of the other countries would be altered).

^{note (1) page 23} See the National Institute Economic Review No. 39, February 1967, pages 14-30.