Throughout 1962 the big economic argument about expansion was not whether it was desirable, but whether it was happening. The official view in the spring was that there was enough demand in the economy to make output rise at an annual rate of 3-4 per cent a year; and this was fast enough. So the Budget was framed with the risk of excess demand in minds.

Usually the main question about employment at the beginning of the year in Britain has been: ‘How big an increase in demand will the available labour supply allow?’ This year the question is the other way round: ‘How big an increase in demand is needed to bring down unemployment to a more normal level?’

The outlook for world industrial production—and consequently in the long run for world trade-is, if anything, a little more cheerful than it was in November. The prospect is still that the rise in both will be slower than in recent years; but the risk that there might be no rise at all is much smaller than it was. First, the fears of any appreciable dip in the United States economy this year have largely evaporated. Then, for the second year running, industrial production in EEC countries, after apparently flattening off in the middle of the year, rose in the fourth quarter; this adds some confirmation to the forecast of a reasonable rise in EEC output next year.

The present position can be summed up in this way:

1. (1) Unemployment, seasonally adjusted—and allowing for the temporary effect of the cold-is probably now something over 2 1/2 per cent, and the underlying trend in January was still rising. (Each 1/2 per cent is about 110 thousand persons.) In addition, there are probably some 150 thousand people who would have joined the labour force last year if demand had been normal; and in 1963 the potential labour force—apart from any reduction in unemployment—is likely to rise by nearly 200 thousand. Altogether, employment could rise by something like 400 to 500 thousand (or 2 per cent) before there was any question of an overall excess demand for labour.

Britain's protective tariff on manufactured goods is, on balance, rather higher than the average level of tariffs imposed against non-members by our partners in EFTA, and than the average level of tariffs against non-members in the EEC countries. In this note, estimates are made of the direct effects on our exports and imports of manufactures of the tariff changes resulting from continued membership of EFTA and exclusion from EEC. The estimates, which relate wholly to the assumed effects of tariff changes on relative prices, are based on the trade flows in 1960 and on the general tariff position in that year. The calculation shows the effect on the 1960 volume of our trade in manufactures of all the tariff changes planned for the period up to 1970. Admittedly, these may not be the major factors determining the future development of trade patterns. In particular, the calculation excludes the further effects which would arise from differences in the rates of economic growth in EEC and EFTA during the rest of the decade, as well as from changes in our competitiveness apart from tariffs.

In any projection of the working population in Britain, it is the number of married women at work which is the main uncertainty. For men and (to a lesser extent) for single women, the numbers likely to be working can be foreseen fairly accurately. Reasonable estimates can be made of the total numbers in each age group, and in all the sizeable age-groups over 95 per cent have a job. These participation rates—that is, the proportion in each age group which is at work—have not changed much in the past, and there is not much scope for them to rise in the future.