HC Deb 22 July 1980 vol 989 cc146-9W
Mr. Austin Mitchell

asked the Chancellor of the Exchequer if, further to his reply dated 3 July concerning the International Monetary Fund index of relative normal unit labour costs, he will circulate in the Official Report a table showing for each of the countries referred to in his first paragraph figures of the actual and the assumed productivity growth.

Mr. Lawson

The information is as follows:

Rough estimates of the difference between growth of potential output per man-hour and growth of actual output per man-hour between two most recent cyclical peaks
(% pa) *
US − 0.4
Canada − 0.5
Japan + 0.7
Germany + 0.6
France − 0.2
Italy − 3.1
Netherlands + 2.0
Belgium − 0.7
Sweden − 3.7
Switzerland −1.0
Weighted average − 0.4
(* A plus sign means that actual output per man.hour grew faster than potential output per man.hour)

For some countries the growth of actual and potential output per man-hour appear rather different, although in aggregate the difference is small. To the extent that recent cyclical peaks are below full potential output then the differences may be overstated.

Mr. Austin Mitchell

asked the Chancellor of the Exchequer if, further to his reply dated 3 July concerning the International Monetary Fund index of relative normal unit labour costs, he will circulate in the Official Report a table showing for the countries referred to in paragraph 3, the Treasury and the International Monetary Fund weights.

Mr. Lawson

The present weights used in the Treasury index are those published in table F2 of the Monthly Review of External Trade Statistics. The present weights used in the IMF index are as follows:

per cent. weights in IMF index
US 23.8
Canada 1.9
Japan 110
Austria 1.2
Belgium 5.1
Denmark 2.0
France 13.0
Germany 214
Italy 7.4
Netherlands 5.0
Norway 1.0
Sweden 4.5
Switzerland 2.7

Mr. Austin Mitchell

asked the Chancellor of the Exchequer if, further to his reply dated 3 July concerning the International Monetary Fund index of relative normal unit labour costs, he will circulate in the Official Report a table showing actual unit labour costs in manufacturing in each of the years 1973 to 1979; and what the unit labour costs would have been, all other things being equal, if the International Monetary Fund figures had been realised.

Mr. Lawson

The IMF estimates of actual unit labour costs in manufacturing in the United Kingdom and of normal unit labour costs (which are calculated as actual labour costs divided by estimates of potential rather than of actual output) are as follows:

Unit labour costs 1975 = 100 Normal unit labour costs
1973 60 64
1974 74 78
1975 100 100
1976 114 114
1977 126 122
1978 142 136
1979 159 151

Mr. Austin Mitchell

asked the Chancellor of the Exchequer if, further to his reply dated 3 July concerning the International Monetary Fund index of relative normal unit labour costs, he will publish in the Official Report a table showing how the Treasury index of relative normal unit labour costs compares with (a) the International Monetary Fund index and (b) actual unit labour costs in manufacturing for each year since 1964 and each quarter since 1 January 1978, including a trend estimate for the first two quarters of 1980; and if he will give reasons for any difference between the Treasury and the actual figures.

Mr. Lawson

The IMF index of relative normal unit labour costs is published in International Financial Statistics. The IMF also publishes an index of relative unit labour costs in International Financial Statistics. The Treasury index of relative normal unit labour costs is given below.

1975= 100 Treasury index of relative normal unit labour costs (*)
1964 … … … … … 115.3
1965 … … … … … 119.6
1966 … … … … … 122.6
1967 … … … … … 116.9
1968 … … … … … 102.3
1969 … … … … … 103.9
1970 … … … … … 104.4
1971 … … … … … 107.2
1972 … … … … … 105.3
1973 … … … … … 91.8
1974 … … … … … 94.4
1975 … … … … … 1000
1976 … … … … … 92.0
1977 … … … … … 87.0
1978 … … … … … 94.2
1979 … … … … … 112.3
1978 1 … … … … 94.7
2 … … … … 92.5
3 … … … … 93.8
4 … … … … 95.9
1979 1 … … … … 101.3
2 … … … … 110.9
3 … … … … 119.1
4 … … … … 1181
1980 1 … … … … 131.5
(* before 1977 these figures are simply a re.weighted version of the IMF series.)

The differences between the Treasury index and the IMF index for unit labour costs arise partly because the Treasury index is calculated using trend rather than actual output, and partly because of differences in the coverage of other countries and their weighting.

Mr. Austin Mitchell

asked the Chancellor of the Exchequer to what extent the difference between actual and potential output shown in paragraph 2 of his reply dated 3 July, concerning the International Monetary Fund index of relative normal unit labour costs, is due to a difference in capacity working; and if he will evaluate any such difference.

Mr. Lawson

The IMF estimates of potential output do not necessarily form a satisfactory basis for estimating the extent of capacity utilisation in manufacturing in the United Kingdom. For a description of the methodology used in constructing the estimates I refer the hon. Member to the article by J. R. Artus on "Measures of Potential Output in Manufacturing for Eight Industrial Countries, 1955–78" in IMF Staff Papers, March 1977 pp 1–35.

Mr. Austin Mitchell

asked the Chancellor of the Exchequer if, further to his reply dated 3 July concerning the International Monetary Fund index of relative normal unit labour costs in manufacturing, he will circulate in the Official Report a table showing for each of the years 1980 to 1983 the potential output, using the same basis as the IMF figures in his second paragraph, and such figures as are available or estimates which can be made of estimated actual output consistent with the Government's forecasts and their medium-term assessment.

Mr. Lawson

IMF projections of potential output beyond 1980 are not available. It is not the practice to publish more information about forecasts than is given in the Financial Statement and Budget Report.

1977 1978 1979 1980 first quarter (Percentage change on 1979 first quarter)
(Percentage changes on previous year)
Relative normal unit labour costs Of which: … … … − 4½ + 7 + 19 + 30
Change in United Kingdom labour costs relative to those abroad expressed in domestic currency … … … + 2½ + 9 + 12 + 15
Change in trade-weighted exchange rate … … … − 6½ − 2 + 6½ + 13

Source: Treasury estimates.

Notes:

  1. (i) A plus sign indicates a loss of competitiveness.
  2. (ii) Relative normal unit labour costs is the product of the exchange rate and the ratio of United Kingdom to competitors costs. Thus the percentage changes in the first row are the product of the percentage changes in the next two rows, not the sum.
  3. (iii) The trade-weighted exchange rate used here is calculated using the weights in the index of competitiveness: it is not the same as the effective exchange rate index.