Macro-economic Forecasting (Hansard, 14 December 1971)

§ 19. Mr. Douglas
asked the Chancellor of the Exchequer if he will make a statement on the facilities available to the Treasury for macro-economic forecasting.

§ Mr. Higgins
The economic assessment divisions, which cover both short and medium-term macro-economic forecasts, consist of three divisions and two supporting units which together employ about 30 professionally qualified staff, most of whom are economists. They work in close contact with the economic 248 and statistical divisions of the other economic departments of the Government. An extensive range of computing facilities is available.

§ Mr. Douglas
Does the hon. Gentleman accept that although the Chancellor of the Exchequer has at his disposal some of the best economic forecasting services available to any Minister of Finance in the world, his incompetence in interpreting the results of this forecasting has resulted in the disastrous unemployment situation?

§ Mr. Higgins
I agree with the first part of the hon. Gentleman's supplementary question, but I certainly do not agree with the second part. We have been in many ways in an unprecedented situation, with a rapid rate of cost-push inflation. It has been extremely difficult, because there has been virtually no historical basis on which to establish relationships, to estimate the effect this will have on unemployment. The effect on unemployment of inflationary wage increases is much greater than we expected.

§ Mr. Molloy
Although the Chancellor of the Exchequer and the hon. Gentleman seem to have remarkable confidence in their policies, which they say are designed to bring down unemployment, every time they come to the House of Commons and say this, the rate of unemployment increases. Would it not be sensible to consider the poverty and anguish which unemployment means and to have the courage to change these disastrous policies?

§ Mr. Higgins
Certainly not. What is important in this area is the question of time lag. If there is one thing that one learns from economic analysis, it is that it is very dangerous to take action in view of all the lags in movement of economic variables. My right hon. Friend has made quite clear his position in respect of the overall management of the economy.