asked 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 extent the assumptions concerning the United Kingdom have been substantiated since the index was formulated.
For 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|
|Actual output in manufacturing 1967=100||Potential output as assumed by IMF||Percntage difference|
1975 = 100