In this review our forecast is extended by a further complete year to the end of 1981. Our forecast for 1980 is in several respects rather more pessimistic than we suggested in August, but the addition of the forecast for 1981 shows that some improvement in real GDP and real disposable income is then expected. Unemployment on the other hand continues to increase but is now likely to be rather lower during 1980 than had previously been thought. As a contrast, inflation in consumer prices is forecast at a rather higher level for 1980, falling only by 1981 to the level previously anticipated for 1980. The current account balance is considerably worsened, not just for 1980 and 1981 but also for the current year, largely as a result of the higher level of imports following their rapid increase in the first two quarters of the year. The borrowing requirement remains very close to our previous calculation and is expected to fall slightly in 1981-2.

Since we produced our August forecasts the prospects for the world economy have deteriorated. Several OPEC oil producers have announced increases which take their prices above the ceiling of the ‘price plus premium’ to which they had jointly agreed, and the outlook for consumers of oil has been further worsened by the announcement of impending reductions in rates of output. Saudi Arabia maintains a relatively moderate stance, but hopes that it would be able and willing to increase its output sufficiently to enforce its wishes on price can no longer be entertained.

Most users of medium-term economic forecasts turn to them because they want to know what the economic future will actually be like, so that they can plan accordingly. Further, a very wide range of alternatives will not be particularly helpful; and many users—given the uncertainties in any case inherent in deducing from a general economic forecast the prospects for an individual firm—prefer a single set of numbers for the medium-term economy.

In most papers which set out to analyse movements in US productivity, a good deal of attention is paid to the contribution of changes in the composition of the employed labour force. In this appendix, the effect on productivity in the UK of shifts in the age-sex composition of the labour force over the period 1971-78 is calculated. Further, the prospects for productivity growth in the UK over the next twelve years are analysed with reference to shifts in the age-sex composition of the labour force.

The present government came to office with a commitment to cut state spending while reducing government intervention in the economy and extending the sphere of private choice through tax reductions. This philosophy, while of significance for the longerterm development of the public sector, is actually of limited use in explaining the 1979 public expenditure reductions. These stem from one of the recurrent crises of financial control which have afflicted public spending plans in the last decade and a half. The purpose of this article is to analyse the financial and economic background to the cuts, which, it is argued, would have called for programme adjustments whatever administration had been in office, though the type of reductions made may bear the imprint of different political philosophies.

The National Institute has launched a series of conferences on important issues of economic policy. The conference papers and accounts of the conference discussions are being published by Heinemann Educational Books. The first two books in the series, entitled Demand Management and De-industrialisation, were the outcome of conferences held in December 1977 and June 1978 respectively. The third book, of which this article gives a brief summary under the same title, appeared this month, following a conference in June 1979. The purpose of the conference was to provide a forum for discussion of the trade and exchange-rate policies which the United Kingdom should pursue domestically and advocate in the international arena, and the choice of topics reflects the attention recently devoted there to non-tariff barriers to trade, general economic relations between North and South, the European Monetary System, and its differing implications for debtor and creditor countries. Future studies will be conducted under the joint sponsorship of the National Institute, the Policy Studies Institute and the Royal Institute of International Affairs. The first under the new arrangement will take place next month, with ‘Britain in Europe’ as its theme. The series has been started with financial support from the Nuffield Foundation.