§ Mr. Gouldasked the Chancellor of the Exchequer if he will publish in the Official Report a table comparing the current real rate of exchange based on relative export prices for the United Kingdom and Germany as a percentage of the 1978 figure together with the percentage increase to the latest available date in each case in (a) manufacturing output, (b) the public sector borrowing requirement as a percentage of gross domestic product, (c) gross domestic product, less oil in the case of the United Kingdom and (d) real interest rates in terms of inflation.
§ Mr. Ian StewartThe information requested is as follows:
122Wsales. Nearly all defence expenditure is counted as current though much of it is of a capital nature and is excluded from these figures for capital expenditure in the table.
Local authorities lost certain functions in 1974–75. Health services were transferred to the central Government. Water and sewerage in England and Wales and public trust ports were transferred to public corporations. On 1 October 1973 responsibility for many local services in Northern Ireland — including police, fire and education — were transferred to the central Government. Full details of these changed responsibilities and the estimated effects on local authority spending are set out in the CSO's "National Income and Expenditure". Broadly speaking, these transfers reduced local authorities' current final consumption by about 0.5 per cent. of GDP, and capital investment by 0.4 per cent. of GDP. They increased central Government final consumption by 0.3 per cent. of GDP.
Percentage changes, 1978 to latest available date Relative Export Prices (1) Manufacturing Output (2) GDP (3) United Kingdom -24 -12.2 +2.88 (-1.5) West Germany +3.3 +5.8 Notes:
1. The percentage change to October 1983 in West German relative to United Kingdom export unit values—total visible trade—expressed in deutschmarks. Because the current £/DM exchange rate is little different from that in 1978, over the period shown the change in relative export prices is almost entirely explained by relatively lower export price inflation in West Germany.
2 To 1983 Q4 for the United Kingdom and Novembe- 1983 for Germany. Seasonally adjusted data.
3. For the United Kingdom the figure shown in GDP (average) growth to 1983 Q3; the figure in brackets relates to non-oil GDP growth to 1983 Q4. For Germany the figure shown relates to GNP growth to 1983 Q3. Seasonally adjusted data at constant prices.
Intercountry comparisons, for particular points in time, can be misleading not only because of definitional and structural differences but also because each country will 123W be at a different stage in its economic cycles. The trough of the United Kingdom recession was reached in 1981 Q2 but the German trough was reached substantially later with the turning point perhaps not until the beginning of last year. 1978 is therefore an unsatisfactory base year for such comparisons. The pattern of changes between 1981 and 1983, for example, is very different from that between 1978 and 1983. For the United Kingdom, the public sector borrowing requirement as a percentage of gross domestic product fell from 5.5 per cent. in 1978–79 to a projected 3.25 per cent. for 1983–84 as published in the 1983 autumn statement. Comparable figures are not produced by the German authorities. There are many problems in estimating real interest rates. A discussion of these problems together with some illustrative estimates, based on different stylised assumptions about expected inflation, appeared in the December 1983 Bank of England Quarterly Bulletin.