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Chapter I. The Economy in 1978

Published online by Cambridge University Press:  26 March 2020

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Extract

The overall pattern of changes in real expenditure and output was markedly different in 1978 from that of 1977 (see chart 1). In 1977, largely because of the undertakings given in the Letter of Intent to the IMF of December 1976, fiscal policy was deliberately restrictive. The stance of fiscal policy was made harsher still by the public expenditure shortfall produced by the operation of the relatively unfamiliar cash limits. There was a fairly small fall in public authorities' current spending and much larger falls in capital expenditures. Private consumption, too, fell as stages II and III of the pay policy operated. Trade to 6 per cent of the labour force. Retail price inflation did, however, fall fractionally from 16.5 per cent in 1976 to 15.9 per cent in 1977 (and to 13 per cent through the year).

Type
Articles
Information
National Institute Economic Review , Volume 87 , February 1979 , pp. 13 - 24
Copyright
Copyright © 1979 National Institute of Economic and Social Research

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References

Note (1) page 15 The high employment budget balance, while a marked improvement on the actual balance as an indicator of fiscal stance, is itself not without drawbacks. In particular, it says nothing about how the high employment level of GDP is to be achieved. To the extent that increased public spending or reduced taxes were needed (rather than a spontaneous expansion of net exports or private investment) this would move the high employment balance back towards, or into, deficit.

Note (1) page 19 An analysis of public sector pay for earlier years, but for male manual workers only, was given in A. J. H. Dean, ‘Earnings in the public and private sectors 1950-1975’, National Institute Economic Review, No. 74, November 1975.

Note (1) page 20 i.e. general government expenditure, plus loans and grants to public corporations, plus net overseas and market borrowing of nationalised industries.

Note (1) page 21 This cost measure abstracts from changes in the general price level but keeps in the effects of relative price changes.