HL Deb 29 November 1983 vol 445 cc682-3WA
Lord Diamond

asked Her Majesty's Government:

  1. (i)What is the statistical basis of the statement by the Lord Gray of Contin on 2nd November 1983 (col. 568) that "between 1975 and 1981 our international competitiveness, measured in terms of relative unit labour costs, fell by no less than 55 per cent., while that of, for example, France and Germany was steadily rising".
  2. (ii)Whether they will provide a breakdown of these figures into separate relevant years and continue them for 1982 and 1983, and
  3. (iii)Whether they will provide similar information for the USA and Japan in addition to France and Germany.

The Minister of State, Scottish Office (Lord Gray of Contin)

The most widely used measures of international price competitiveness, on which I based my statement, are the indices of relative labour costs per unit of manufacturing output, adjusted for exchange rate changes, which are compiled and published by the International Monetary Fund. These indices are 'normalised' to allow for cyclically-induced differences between countries. The following table gives the indices for the period 1975 to 1983 Q2 for the countries in question. An increase in the cost indices shows a decline in international competitiveness.

RELATIVE NORMAL UNIT LABOUR COSTS IN MANUFACTURING 1980=100
UK France Germany USA Japan
1975 74.1 100.5 93.6 107.1 108.6
1976 68.8 99.5 94.4 111.9 106.7
1977 65.9 97.2 99.7 109.5 113.0
1978 70.0 94.6 103.3 101.0 128.7
1979 80.9 98.1 104.2 98.8 111.9
1980 100.0 100.0 100.0 100.0 100.0
1981 107.8 92.8 89.0 114.8 113.0
1982 104.6 88.9 89.2 128.7 104.1
1981 Q1 115.4 94.5 89.0 106.8 116.1
Q2 109.6 92.0 89.0 114.6 113.4
Q3 103.7 92.3 87.2 121.0 112.4
Q4 102.4 92.6 90.9 116.7 110.2
1982 Q1 104.9 92.0 87.4 122.2 108.8
Q2 104.6 92.2 88.6 126.3 104.5
Q3 105.1 85.7 89.6 132.1 101.1
Q4 102.7 85.7 91.6 134.0 101.9
1983 Q1 92.9 88.6 89.8 132.9 111.8
Q2 98.6 83.9 89.0 135.7 110.0

Source: 1MF

From this table, it can be calculated that between 1975 and 1981 Q1 the United Kingdom's international competitiveness declined by 55 per cent. Over the same period, cost competitiveness in France improved by 6 per cent. and by 5 per cent. in Germany; USA's competitiveness was unchanged; and Japan's deteriorated by 7 per cent. Since then. United Kingdom competitiveness has recovered by 15 per cent.; in France competitiveness has improved by a further 11 per cent.; German competitiveness is unchanged; USA's competitiveness has deteriorated by 27 per cent.; and Japan's has improved by 5 per cent. By their nature, these indices give equal weight to movements in the exchange rate, earnings and productivity. This means that short-term movements in the indices are likely to be dominated by exchange rate changes, while long-term trends are more likely to be influenced by the trend in productivity.