^{note (1) in page 4} See the ‘Financial Times Monthly Survey of Business Opinion’ published in the Financial Times, 3 May.

^{note (1) in page 6} The Chancellor stated that the official underlying (‘no budget’) forecast growth between the first half years of 1971 and 1972 was ‘not much more than 2 per cent’ (House of Commons Debates, 30 March, col. 1368), which compares with a final (‘post budget’) forecast of growth over that same period of 3 per cent (Financial Statement and Budget Report, 1971-72, table 4, page 12).

^{note (1) in page 7} Empirical investigation of the shifting of corporation tax has produced results ranging from the view that 100 per cent of a corporation tax increase is passed on, to the view that there is hardly any shifting at all. The firmness of any con clusions from these studies, all based on data for the United States, is in great doubt owing to the inadequacy of the basic figures and the problems associated with adequately specifying, in statistical terms, the question on hand. Some references are: Musgrave, R. A. and Krzyzaniak, M., The shifting of the corporation income tax (Baltimore, 1963); Krzyzaniak, M. (ed.), The effects of corporation income tax (Detroit, 1966); Gordon, R. A., ‘The incidence of corporation income tax’, American Economic Review, September 1967, pages 731-756. As the theory of positive short-term shifting suggests that the effect will only be important for oligopolistic and non-profit maximizing industries, a priori predictions are open-ended as regards the symmetry of shifting. We have assumed in the present forecast a smaller effect in the abatement of prices than we assumed for the opposite case when the corporation tax was last increased, because of the current profits ‘squeeze’.

^{note (2) in page 7} See, for example, A. R. Nobay, ‘Forecasting manu facturing investment—some preliminary results’, National Institute Economic Review, no. 52, May 1970, pages 58-66, especially page 63.

^{note (3) in page 7} J. D. Whitley and G. D. N. Worswick, ‘The productivity effects of selective employment tax’, pages 36-40.

^{note (4) in page 7} Effects of the Selective Employment Tax, First Report ‘The distributive trades’, by W. B. Reddaway, HMSO 1970.

^{note (1) in page 8} The demand effect of a reverse productivity shift would appear to be negligible, whilst that associated with enhanced profits is subject to heavy leakages in the form of retentions, corporation and personal income tax and savings offsets.

^{note (2) in page 8} This is the official figure. It has been suggested that the effect might be more. See Godiey and Cripps' contribution in The Times (Business News Review), 5 April 1971.

^{note (3) in page 8} Using the same figures as given in Godley and Cripps, op. cit.

^{note (4) in page 8} The implicit deflator of the constant price series of consumers' expenditure.

^{note (5) in page 8} National Institute Economic Review, no. 55, February 1971, Chapter II.

^{note (1) in page 12} The schedules provide for a delivery to be made in each of the months September and December 1971, and January and March 1972, with two further aircraft to be delivered in April 1972. The forecasts in table 1 include these deliveries on a smoothed basis; in table 8 they are accounted for in accordance with the projected delivery dates.

^{note (1) in page 13} In this year as a whole we expect fuel prices in the DTI index of import prices to rise by some 20 per cent, with gains of around 6 per cent in finished manufactures and perhaps 3 per cent in food prices. Next year we should expect fuel prices to be approximately stable (taking the twelve months as a whole) and the inflation of finished manufactured prices to moderate to, perhaps, 4 per cent. Prices of semi-manu factures, on the other hand, which make up nearly a quarter of the DTI index, and prices of basic materials, which account for a similar proportion, seem likely to rise more in 1972 than this year (when indeed, for the former group of prices, some slight fall may occur).

^{note (2) in page 13} See National Institute Economic Review, no. 55, February 1971, page 28, and chart 2, ibid.

^{note (3) in page 13} House of Commons Debates, 30 March 1971, col. 1366.

^{note (4) in page 13} Financial Statement and Budget Report 1971-72, page 11

^{note (5) in page 13} Similar receipts in earlier years were, perhaps rather strangely, deducted from expenditure, and presumably this treatment will be maintained.

^{note (1) in page 14} National Institute Economic Review no. 55, February 1971, pages 31-33. The full-year revenue loss associated with the budget exceeds £600 million, but the mix of tax reductions, which partly reflects an objective of improving corporate liquidity, appears to imply an unusually low demand effect.

^{note (1) in page 15} HMSO, ‘Public Expenditure 1969/70 to 1974/75’, Cmnd 4758.

^{note (2) in page 15} The November-December (1970) Inquiry of the Department of Trade and Industry suggested a 2 per cent decline between 1970 and 1971, with little change between 1971 and 1972.

^{note (1) in page 16} We set out some calculations on that occasion in the National Institute Economic Review, no. 50, November 1969, pages 38-39. It now looks as though our assumption then that German exporters would absorb much of the increased cost was wrong, although our forecast that the German trade balance would be much the same in 1970 as in 1969 was nearer the mark.

^{note (1) in page 19} Defined, for the purpose of this exercise as the sum of wage and salary incomes and net national insurance con tributions less income tax, divided by the number of employees in employment.

^{note (2) in page 19} The most important relationships involved are equations linking prices to wages, consumer spending to real incomes and imports to spending. The background analysis also provides for relationships involving income taxes levied on employment incomes (which provides a basis for calculating the variants ‘B’ and ‘C’ shown in table 12), and other items in the personal income and national accounts.

^{note (1) in page 19} National Institute Economic Review, no. 55, Februarv 1971, pages 49-51.

^{note (1) in page 20} The analysis here clearly runs counter to the view that rising unemployment is simply caused by money wage increases. So far as 1970 was concerned we doubt whether the acceleration of money wage increases had much effect upon the volume of either investment or exports. Inasmuch as wages pushed ahead of prices, the result was to increase real consumer expenditure, so that the aggregate outcome was for output and employment to be somewhat higher than they would otherwise have been. At some point, the inflation will begin to reduce the volume of exports and may raise imports; but the influence upon real investment is uncertain, being the outcome of a (favourable) expansion of monetary demand and an (unfavourable) pressure on costs. Real consumption will continue to be much influenced by the relative movement of wages and prices, although in the longer run the unfavour able export effect may outweigh any favourable consumption effect. This causal sequence excludes the case where rising money wages cause government policy itself to be made more restrictive than it might otherwise have been.

^{note (2) in page 20} Financial Statement and Budget Report, 1971-72, pages 10-12.

^{note (1) in page 21} Some details of this were published in The Sunday Times, 11 April 1971.

^{note (2) in page 21} This is one reason for the discrepancies in the behaviour of some of the series in 1970. There are also some conceptual differences in the measurement of GDP and the allocation of residual errors among the components of demand. The FINSTAT figures for all items are rounded to the nearest £10 million (1963 prices).