§ Mr. Deakins
asked the Chancellor of the Exchequer what is the correlation between changes in money supply (M3) and changes in the level of unemployment.
§ Mr. Nott
Although it is generally agreed that changes in monetary condi-
NET INCOME OF TWO CHILD FAMILIES (CHILDREN AGED 6 AND 10) ON AVERAGE INDUSTRIAL EARNINGS £ per week October 1964 October 1970 October 1972 Annual percentage increase in income in real terms Earnings Net income Earnings Net income Earnings Net income 1964–1970 1970–1972 Wales … … 18.04 16.12 27.93 22.27 34.19 28.10 0.7 3.4 Scotland … … 16.92 15.31 27.04 21.67 33.42 27.20 1.1 3.2 England … … 18.32 16.34 28.26 22.47 34.81 28.12 0.6 3.0
(1) The figures for average earnings in Wales, Scotland and England in October 1972 have been estimated by assuming that they bear the same relationship to the United Kingdom figure as they did in October 1971, the latest date for which separate figures are available.
(2) Net income is obtained by adjusting for FAM, tax and national insurance contributions as appropriate; and deducting the cost of school meals, milk and a representative amount of prescriptions, dental treatment and spectacles.
(3) To obtain the increase in real terms the net income figures are deflated by the retail price index.160W
tions affect demand, the complex interaction between monetary and real variables prevents a meaningful correlation between changes in the money supply and in the level of unemployment.