§ Mr. Austin Mitchellasked the Chancellor of the Exchequer, further to his reply dated 20 May concerning the International Monetary Fund index of relative unit costs, whether in making use of the index his Department has regard to the assumption concerning productivity; and if he will provide figures showing to what 675W extent the assumptions concerning the United Kingdom have been substantiated since the index was formulated.
§ Mr. LawsonFor use in forecasting, the Treasury constructs an index of relative normal unit labour costs with a different assumption about trend productivity growth in the United Kingdom. The projections of trend productivity growth used in the IMF's index seem rather high, and its estimate or normal unit labour costs in the United Kingdom correspondingly low. The table below shows the assumptions underlying the IMF index and the one constructed in the Treasury:
PERCENTAGE PER ANNUM INCREASE IN ASSUMED PRODUCTIVITY GROWTH IN MANUFACTURING IMF Treasury 1976 3¾ 2½ 1977 2¾ 1¾ 1978 2¾ 1½ 1979 2¾ 1½ For some other countries apart from the United Kingdom the IMF's estimates of trend productivity growth diverge from actual productivity growth in recent years. But for the aggregate of United Kingdom competitors the IMF estimates seem to be broadly in line with actual productivity growth.
The differences between actual output in manufacturing in the United Kingdom and the IMF's assumptions about potential output are as follows:
Actual output in manufacturing 1967=100 Potential output as assumed by IMF Percntage difference 1973 123.3 122.4 -0.1 1974 121.2 124.1 -2.3 1975 113.8 127.9 -11.1 1976 115.4 131.9 -12.5 1977 117.2 135.6 -13.6 1978 118.1 139.3 -15.2 1979 118.4 143.1 -17.3 Recent figures for the IMF's index and for the Treasury index are set out in the table below. The Treasury index differs from the IMF index by using a smaller number of competitor countries and different weights, as well as by using the different assumption about trend United Kingdom productivity growth.
676W
1975 = 100 IMF index Treasury index 1978— First quarter 94.1 94.7 Second quarter 91.1 92.5 Third quarter 93.4 93.8 Fourth quarter 94.8 94.9 1979— First quarter 97.9 101.3 Second quarter 106.1 110.9 Third quarter 112.2 119.1 Fourth quarter 108.3 118.0 1980— First quarter n.a. 131.5