§ Mr. Austin Mitchellasked the Chancellor of the Exchequer if he will publish in the Official Report the conditions on which he bases his assessment in page 2 of Economic Prospects that three-fifths of the loss of competitiveness of 1978–1980 is due to unit labour costs and two-fifths to exchange rate appreciation.
§ Mr. LawsonThe assessment of competitiveness inEconomic Prospects to end-1981 was based on an index of relative normalised unit labour costs. This index has three components—United Kingdom normalised unit labour costs (measured in sterling), competitors normalised unit labour costs (measured in their domestic currencies) and the trade-weighted effective exchange rate.
The index indicates a deterioration in cost competitiveness of around 40–50 per cent as between the average level for 1978 and the estimated average level for 1980. Over this period, the exchange rate rose by 18 per cent; with the remainder of the deterioration attributable to United Kingdom normalised labour costs growing at a faster rate than those of our competitors, when measured in terms of respective domestic currencies.
§ Mr. Austin Mitchellasked the Chancellor of the Exchequer if he will publish in the Official Report, further to his assessment of the loss of competitiveness due to labour costs in Economic Prospects, how much of the increase in unit labour costs 1978 to 1980 is due to decreasing production putting up unit costs and how much to the actual increase in labour costs.
§ Mr. LawsonThe calculation inEconomic Prospects were based on an index of normal unit labour costs, which assumes a trend rate growth of productivity.