The forecasts published by ourselves in February, and by the Treasury and the London Business School in March, showed remarkable unanimity about the prospects for the economy in 1988. We all said that the growth rate year on year would be about 3 per cent, that the rate of inflation would be about 4 per cent by the fourth quarter, and that the current account of the balance of payments would be in deficit by about £4 billion. It remains to be seen whether this solidarity can be maintained in the face of the conflicting evidence about the recent performance of the economy from the indicators which have been published in the last three months.

Output growth in 1987 appears to have been very strong generally in the major seven economies. Provisional national income data for the fourth quarter in France, Germany and Japan have all indicated a stronger performance than we anticipated in our last Review in February. Our November forecast of Japanese growth in 1987 was 1¼ per cent too low, and as further information has become available we have revised up our forecasts for growth in 1988 and 1989 by 1½ to 2 per cent per annum. The Japanese have been willing to respond to US pressure and adopt art expansionary fiscal stance, and investment growth has also been rapid. We have also revised our forecast of US growth in 1988 and 1989. We are now expecting growth in the US to be ½ a per cent higher in 1988 than we were in February, but because we are now more pessimistic about imports we are forecasting a slowdown in activity into 1989.

The National Institute was founded in 1938, after a first initiative by Sir Josiah Stamp in the early 1930s. Stamp, who was the President of the London Midland and Scottish railway, had been connected with a Rockefeller Foundation scheme to provide fellowships in the social sciences; he became convinced that a wider attack was needed on the problem of financing the social sciences in Britain and his objective became the development of a central unit, of British origin, with funds under its own control. This would supplement and replace the help given by the Rockefeller Foundation (then the main source of research funds in the British social sciences) and develop an increasingly large research effort in economics and related subjects. Stamp made known his views and with the support of a number of prominent academics, in particular William Beveridge, Director of the London School of Economics; Henry Clay, Economic Adviser to the Bank of England; and Hubert Henderson, Secretary of the Economic Advisory Panel, began to search for British financial support.