§ Mr. Norman Lamontasked the Chancellor of the Exchequer whether he will publish: (a) two indices of the relative price effect, on the old and the new definitions, and (b) estimates of the relative price effect at 1977 survey prices, for: (i) 1969–70 to 1977–78 and (ii) 1978–79 and 1979–80.
§ Mr. Joel BarnettThe estimates of the relative price effect in Cmnd. 7049 have been made on the best available basis and it would be misleading to publish other, less satisfactory, estimates. It is most appropriate to compare the prices of public expenditure with the GDP deflator at market prices.
Gross domestic product at market prices in 1977–78 is likely to be about 2 per cent, higher than GDP at factor cost, mainly because the national insurance surcharge is regarded as a tax on expenditure. This contributes to the negative relative price effect shown for the years 1977–78 to 1979–80.
Survey prices are the prices ruling at a variety of different dates. Estimates of the relative price effect at 1977 survey prices would be less meaningful than the published estimates. These are based on the price levels of 1976–77 because this is the most recent period providing a reasonably firm common price base.
§ Mr. Norman Lamontasked the Chancellor of the Exchequer why the relative price effect has been redefined to relate it to the GDP market price deflator rather than GDP factor cost deflator.
§ Mr. Joel BarnettPublic expenditure is measured at market prices, not at factor cost, and comparisons of public expenditure with the gross domestic product are now generally made at market prices.