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Unemployment And Inflation

Volume 960: debated on Friday 15 December 1978

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asked the Chancellor of the Exchequer (1) what is his estimate, derived from his Department's computer models of the economy, of the effect on the levels of unemployment and inflation of an additional public expenditure programme of £1 billion in 1979–80;(2) what is his estimate, derived from his Department's computer models of the economy, of the effect on unemployment of a one penny reduction in the standard rate of income tax in 1979–80.

I regret that I am unable to give the hon. Member the information which he requests. A programme of increased public expenditure or a cut in income tax would influence unemployment and inflation to different extents depending upon what assumptions were made about, for example, the accompanying monetary and exchange rate policies and in the case of public expenditure its composition and timing. The appropriate assumptions to make depend on the context in which the results are to be used, and would need detailed discussions between the economist performing such a simulation and its ultimate users. I am unwilling to commit my Department's resources in this way which would be costly and displace other work. The hon. Member might wish to pursue his inquiry via his access to the Treasury model through the Library of the House.