How much influence does the UK have in Europe? How has this changed? We argue that the UK has tended to view its relationship with the EU in transactional terms, and that this has led to a dominant understanding framed in terms of ‘costs’ and ‘benefits.’ However, thinking more broadly gives a more nuanced picture of British influence. Thus, we approach this question from two directions: examining the historical record of the UK's role in the development of the EU and the single market; and looking at the ways in which British politicians and officials exert influence in the current political structure. We argue that although the UK has generally had a good track record of success, this has often been threatened by domestic political difficulties – as the current referendum debate shows.

The Institute periodically reviews the accuracy of its macroeconomic forecasts. Pain et al. (2001) compare the performance of NIESR output forecasts to a naïve forecast that uses a simple rule to predict growth next year. They find that between 1980 and 2000 the National Institute forecast performed better than a naïve, or random walk, forecast in two years out of three. Poulizac et al. (1996) consider a sequence of quarterly economic forecasts published by NIESR between 1982 and 1995 (beginning with that produced in February for the growth of GDP and inflation in the following year and finishing with the forecast produced in November for growth in the current year). They show how the reliability of the Institute's forecast improves as the forecast horizon approaches and conclude that errors to GDP and inflation forecasts are normally distributed. In a similar vein, Mitchell (2005) shows that the Institute's point forecast of inflation is reliable whilst its measure of uncertainty has been exaggerated.

There is a widespread view that official estimates of the capital stock in the UK may be subject to substantial error. However, until recently making any major improvement would have incurred costs beyond any reasonable budget, so the Central Statistical Office has only been able to make relatively marginal changes despite its continuing concern about the problem. Now, as the result of the computerisation of asset records and modern accounting requirements, a radical change from existing indirect estimates towards direct estimation is possible. This note, drawn from the results of a recent research project, appraises the problem, suggests how the estimates of the capital stock in the UK might be improved using existing methods and then shows how direct estimation could be used to derive improved current and retrospective estimates.

Populist responses to matters of social concern are considered in a framework like that of Acemoglu and Robinson’s ‘narrow corridor’ that supports liberty and justice. We discuss the risk that such responses could result in a country being pushed out of this narrow corridor—and, if so, with what long-run consequences. We conclude that a political system of ‘checks and balances’ can play a key role in keeping the society within the narrow corridor; but it is incumbent on the existing political system to confront the issues of populist concern so as to come up with creative solutions.

The EU´s falling share in global manufacturing has fuelled concerns about an overall loss of EU competitiveness, in particular vis-à-vis China. We analyse the empirical evidence underlying these concerns by applying a newly developed decomposition technique to global input-output data spanning the years 2000 to 2014. Our results confirm the diminishing role of the EU in manufacturing value chains, but also show that this is mostly, by nearly 75 per cent, a consequence of the geographical and sectoral reallocation of global demand, reflecting the lower economic growth in the EU relative to the rest of the world. Still, the other almost 25 per cent of the EU’s loss of global share is explained by its lower participation in manufacturing value chains, which confirms a downturn in EU competitiveness. By extending the analysis to individual manufacturing activities we show that this general trend is more pronounced for low-tech (e.g. textiles) than high-tech sectors, with pharmaceuticals emerging as the most resilient EU industry. Policy concerns appear to be most warranted for electronics, a key sector for which the EU´s global share fell even more than for overall manufacturing, without evidence that EU value added from upstream service inputs could significantly mitigate this trend.

Government post-Brexit will face sustained and difficult challenges as the UK adjusts to its new situation. Yet these challenges risk being exacerbated by fundamental changes in UK political debate that are affecting the perceived legitimacy and effectiveness of the system and structures of government. These include erosion of the clear distinction entrenched for the last 150 years between political choices by elected representatives and impartial administration by the civil service; the disruption of traditional deliberative processes by digital and social media; and increased centralisation of decision-making in No. 10 Downing Street combined with inadequate scrutiny of that decision-making either by the Cabinet or by Parliament.

The centralisation of executive power reduces its perceived legitimacy across the UK, with devolved government in Scotland and Wales seen as contingent on the Westminster Parliament and Northern Ireland under control by central government. Fiscally, the UK has become the most centralised democratic country in the world. As government faces up to the challenge of unwinding membership of the legal and regulatory framework developed during 45 years of EU membership, it is vital that the UK's political structures restore their legitimacy and efficiency.

Necessary reforms start with greater transparency about how government really works today. A PM's Department should be created, separate from the Cabinet Office; senior appointments including the Chief of Staff and ‘Advisors’, as well as instructions from No. 10 to departments, should be subject to effective Parliamentary scrutiny. Legally entrenched structures are required to confirm that devolved powers cannot simply be overridden by the Westminster Parliament. Greater fiscal autonomy should be guaranteed to local government.

Finally, politicians should choose either to recommit explicitly to the original system whereby the civil service remains separate from politics and take steps to make it effective; or acknowledge the drift towards greater political control of the civil service and introduce safeguards to minimise political abuse, for example by taking steps to increase scrutiny of appointments and expenditure.

The Institute has long examined overseas developments in order to understand better domestic macroeconomic dynamics. The organising principle for much of the postwar period was simply the impact on net trade with an implicit view on whether the exchange rate was at an appropriate level and, as such, the external sector was viewed as a constraint on domestic activity. Increasingly integrated factor markets in the modern era of globalisation means that the overseas sector plays a fundamental role in the evolution of both aggregate demand and supply in the UK economy and it is increasingly hard to disentangle the overseas from the domestic sectors. It is not so much that we should reverse this integration but more how to design policy to limit any undesirable consequences on regional and income distribution, as well as aggregate fluctuations in activity.

Discussion of the UK's housing crisis is of long date, and tends to focus on a simple story about a mismatch in housing supply and demand and the consequent need to build more homes. Yet the reality is more complex with multiple sub-plots including social housing, stress in the private rented sector, benefits, subsidies and ultimately taxation of home ownership.

At the bottom of the market, the crisis is real and acute, as manifested in a sharp increase in homelessness and rough sleeping. The inescapable answer is to increase the depleted stock of social housing and widen eligibility criteria. An increase of 100,000 social units a year in England would help address this problem, as well as alleviate the financial squeeze on tenants of the private rented sector, whose number has grown sharply in the past 15 years in tandem with a steep rise in the housing benefit bill. Recent efforts to curb housing benefit have further increased distress, so it will be necessary to consider increasing benefits again alongside regulatory interventions with private landlords.

In the home ownership market, recent government intervention has taken the form of the much-criticised Help-to-Buy Equity Loan scheme. This market policy to support new-build homes should be wound down and replaced by a scheme to endow all young people with a capital sum that they could use for second-hand homes as well. More generally, a more sophisticated approach to planning home-building is needed, both for assessing overall numbers and their regional distribution and in financing the supporting infrastructure.

But none of these measures is a panacea for a housing crisis that is in large part a symptom of problems in the wider economy, such as low relative wages for young people, a lack of clarity about environmental issues, and failing places. A successful policy package to address the distorted structure of the housing market must also grasp the most difficult nettle of all – namely the way the tax benefits of owner-occupation incentivise overconsumption of housing and a widening wealth gap between renters and home owners, and between owners in different parts of the country. If we spend more to help those who struggle to afford decent housing, then it is only just to raise more taxation from those who benefit from restrictions on housing supply – whether through reform to council tax, a wider wealth tax or a limited form of Capital Gains Tax on principal residences.

The article connects two streams of recent research on the financial sector. The first is the regulation literature, which emphasises the central role of incentives in the financial sector. It points out that the challenge of financial sector regulation, highlighted by the global financial crisis, is to align private incentives with public interest without taxing or subsidising private risk-taking. The second stream of research relates to financial structures and examines the mix of financial institutions and financial markets in an economy. It finds that, as economies develop, services provided by financial markets become comparatively more important than those provided by banks. The article brings these two streams together, pointing out that — as financial systems develop from bank-based to market-based — a traditional regulatory approach that relies on banking ratios becomes less effective. There is thus a greater need for properly monitoring and addressing the underlying incentive weaknesses in market-based systems.

This article examines the scale and nature of the impact of 1990s migration on the populations of the eight largest conurbations in Britain, with particular reference to their labour markets. It shows that all these cities have been performing more strongly in demographic terms than in the 1980s, but London has seen by far the biggest upward shift in rate of population change. The change has come about principally due to increased net immigration from overseas, for though the urban exodus to the rest of the UK was at a low point at the beginning of the decade, it has subsequently returned to its long-term of average of 90–100,000 a year net loss. The article goes on to look — in as much detail as the available data allows — at the composition of both within-Britain and overseas migration, focusing especially on its industrial and occupational characteristics. The ‘net urban exodus’ is found to be skewed towards the more skilled and generally wealthier sections of the population, especially in the case of the provincial conurbations. Similarly, the net gains from mainstream international movements are biased towards more qualified people, notably students but also professional and managerial workers, helping to some extent to offset the effects of the urban exodus. There is, however, no detailed information about the asylum seekers and ‘visitor switchers’ that are now contributing a significant share of overall net immigration, especially for London, and it is also extremely difficult to gauge the effects of emigration on cities. Given the importance of migration for British cities in the 1990s and projected for the next two decades, there is an urgent need for the improvement of data sources on migrants' characteristics and for the more systematic analysis of the migration component of labour market change.

In general the importance of consumer goods in world trade is declining. But this is not true of durable consumer goods. From 1937 to 1950 this group held its share of total trade in manufactured goods at about 7 per cent; from 1950 to 1957 the figure rose to 8 per cent; and in 1958—mainly because of the sharp rise in shipments of cars from Europe to the United States—it went up to nearly 9 per cent (table 9).

One of the more troubling aspects of economic performance in the UK since the recession has been the persistence of high levels of public sector borrowing. Borrowing reached a peak of 7.1 per cent of GDP in 1993–94 and has since fallen to 4.5 per cent in 1995–96, with a further fall to 3½ per cent in prospect for this year. Continued borrowing at high levels has raised public sector indebtedness. On the Maastricht treaty definition, general government debt has risen from 41.9 per cent of GDP in 1992 to an estimated 54.2 per cent of GDP in 1995 so that much of the leeway below the 60 per cent reference level has been used up. The overall net worth of the public sector has declined from 28 per cent of GDP to 14 per cent over the same period.

In the past decade early years education has expanded throughout England with progressive extensions in entitlement to some hours of free provision. Furthermore, there is consistent evidence that shows that early years education leads to improvement in cognitive and social development for children. This paper uses the latest data from the Millennium Cohort Study to consider whether, in an era of near universal provision, receipt of early years education still leads to better outcomes for children than for those who did not receive early years education and whether different characteristics of provision produce better outcomes. The outcome measures we consider are the Foundation Stage Profile Assessments that apply to all children in England.

We use the United Kingdom Labour Force Survey to estimate the returns to schooling and job-specific experience in sixteen different industry sectors over the period 1994-2001. Next, assuming skill levels are fixed, we assess the marginal effect on these returns of the capital intensity of production and the ICT intensity of capital. Our results indicate that in the UK, over the period 1994-2001, the rising ICT intensity of capital was associated with a rise in the return to schooling, and a reduction in the return to job-specific experience.

This note analyses the price changes of some 470 manufactured products in five recent years. They were taken as a sample from the price quotations on which the Board of Trade bases its wholesale price index for manufactured products. Since the conclusions for the engineering industry are rather different from those of other industries, the two groups— engineering and non-engineering—are discussed separately. Food, drink and tobacco prices are excluded throughout.

The house price and lending boom of the 2000s is widely considered to be the main cause of the financial crisis that began in 2007. However, looking to the past, we find a similar boom in the late 1980s which did not lead directly to a global systemic banking crisis – there were widespread banking difficulties in the early 1990s but these were linked mainly to commercial property exposures. This raises the question whether the received wisdom is incorrect, and other factors than the housing boom caused the crisis, while macroprudential policy is overly targeted at the control of house prices and lending per se.

Accordingly, in this paper we compare and contrast the cycles in house prices over 1985–94 with 2002–11. There are more similarities than contrasts between the booms. Stylised facts include a similar rise in real house prices where booms took place, and a marked rise in the real mortgage stock along with real incomes. The aftermath periods are also comparable in terms of house price changes. Econometrically, determinants of house prices are similar in size and sign from the 1980s to date.

There remain some contrasts. Leverage rose far more in the later episode and did not contract in the aftermath. Mean reversion of house prices is greater in the earlier period. The earlier boom period showed differences with average house price behaviour which was not mirrored in the most recent boom and inflation was higher. Despite the contrasts, on balance we reject the idea that the recent boom was in some way unique and hence the key cause of the crisis. There is a need for further research to capture distinctive structural and conjunctural factors underlying the recent crisis which differ from the earlier boom and some suggestions are made.