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Chapter VI. Some Notes On the Economy in 1975

Published online by Cambridge University Press:  26 March 2020

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Extract

1975 will be remembered as the year when inflation reached 25 per cent and threatened to get out of hand. The year opened with prices rising fast and still accelerating, and on the wages front, the Social Contract Mark I seemed to be wholly ineffective in moderating the size of claims. The year ended with prices still rising but decelerating markedly, while the £6-a-week limit on all pay increases introduced in the summer seemed to have been so far universally observed.

Type
Other
Information
National Institute Economic Review , Volume 75 , February 1976 , pp. 80 - 100
Copyright
Copyright © 1976 National Institute of Economic and Social Research

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References

Note (1) page 87 Cmnd 4829, table 3.1.

Note (2) page 87 See HC 535, 30 July 1975. The intention to use cash limits on expenditure to back up the £6 pay policy was announced on 11 July, in the White Paper, Attack on Inflation, and incorporated in the rate support grant settlements for 1976/7 announced on 21 November 1975.

Note (1) page 88 Such an error is important if control of money expenditure, as in the cash-limit concept, is seen as a way of controlling inflation; otherwise it will not affect the real cost of pro grammes and so the real burden of taxation implied. It appears that the GDP deflator for 1974/5 was underestimated by about 5 per cent in 1970/1—an additional £2,200 million at current prices.

Note (2) page 88 See HC 69-II, 11 December 1975, pp. 249-254, and Treasury Release, 21 November 1975. Mr Godley's contribution to the debate is to be found in HC 69-II, pp. 212-224, and in The British Economy, Trends and Prospects, Vickers da Costa Research Department, December 1975.

Note (1) page 90 The ratio of UK export prices to the prices of manu factured exports from other major trading nations, both expressed in dollars, has not moved outside a band of ± 1 per cent since the beginning of 1974.

Note (2) page 90 See Appendix Table 19. The year 1971 represents a minor exception to this trend as the UK share then rose, but by only 0.1 per cent.

Note (1) page 98 Our forecast assumed an effective depreciation of sterling of 7 1/2 per cent and the alternative LBS forecast a 10 per cent devaluation. The out-turn was close to the LBS assumption.