https://cpes.org.uk/om/files/original/9f718f2105ee4b3d9e62bc8f189f3ade.pdf b520aff06d64ac922e92503cb0943caf Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Title A name given to the resource Technical Manual on the CEPG Model Text A resource consisting primarily of words for reading. Examples include books, letters, dissertations, poems, newspapers, articles, archives of mailing lists. Note that facsimiles or images of texts are still of the genre Text. Text Any textual data included in the document ' Cambridge Economic Policy Group TECHNICAL MANUAL ON THE CEPG MODEL by M.J. Fetherston 2nd Edition May 1977 ' Contents Introduction I General Methodology Accounting definitions Causal assumptions Treatment of behavioural relationships Solution II The Model 1. Private expenditure 2. Balance of payments 3. Public sector 4. North Sea 5. Employment 6. Earnings 7. Prices 8. Stockbuilding and stock appreciation 9. GDP identities 10. Money supply and DCE Appendix I Appendix ti ' Introduction - 1- This manual contains a full specification of the model used by the Cambridge Economic Policy Group to produce medium-term assessments of the UK. economy. The version of the model described here is that used to generate projections of the economy up to 1985 published in the group's Economic Policy Review, March 1977, No.3. + The model is implemented by a set of general- and special-purpose computer programs~; these are not described in the manual, which is principally concerned with the structure and behavioural relationships of the model, which is the joint work of CEPG members. Part I of the manual briefly explains the methodology employed, noting where and why concepts underlying definitions of variables used differ from those implicit in the official national accounts, describing causal assumptions and the treatment of behavioural·relationships, and explaining how solutions are obtained. Part II of the manual gives a full specification of the relationships and variables of the model, grouped by broad topic. Appendix I tabulates values of constant and trend coefficients estimated on currently available data. Appendix II comprises a full index of variables used in the model. + Hereafter referred to as EPR No.3. These Fortran programs were <t;rritten by Francis Cripps and !1artin Fetherston, for use on the University of Cambridge's IBM 370/165, with facilities · provided by the University Computing Service. The regression programs owe mu..::h to l:ork on time-series estimation by M.H. Pesetran, a for:me1· member of the Group. · · 2- 1 Ceneral Methodo1ogz The model consists of a set· of precisely defined varlabies for which ~nnual d.atahave.be~n obtained (maj.nly from national accounts) covering at least the period from 1960·to date, together with a set of functional relationships between the variables which :are either identities or technical · I- , and behavioural .hypotheses. The v~riables of the system have been chosen and defined to permit a simple but comprehensive description of key short and mediU!D""term objectives, instruments, ·exogenous conditions and· structural relationships which constrain macro-economic policy in the UK. Accounting definitions The basic data of the model differs from official statistics in four main respects. First, production sectors are classified into 'North Sea', 'public services' and the 'business sector' in order to provide an explicit · analysis of the effects of future de~elopment of the North Sea on national output and income., and to take account of the effect of future levels of public service employment on the growth of overall productive potential. Second, disposable income is divided between three branches of the private sector- 'household-grants', 'wages and salaries', and 'property income' (the ;latter includes all private rents and income from self-employment as. well as company profits, interest, etc.). This division allows explicit account to be taken of the effects of future policies on the distribution of private income and on the timing and composition of private expenditure. Third, indirect taxes and subsidies are divided into two categories - 'sales taxes' which are specific to different kinds of final expenditure (i.e. taxes on consumption, investment, imports etc.) and those which feed into business costs getferally.. This analysis forms the basis of a distinction · betw~en expenditure valued at market prices and at 'full cost'. The latter. ' .excludes taxes and subsidies on outputs but includes net taxes on primary inputs which to the business secto~ comprise local authority rates, 'protective duties on imports, royalties on North Sea supplies of oil and ·gas, less subsidies to public corporations. All imports, whether of intermediate or final goods, are assumed to enter the production process as inputs;. imp·orted final goods re-emerge in unchanged form but after sales taxes and addition of distributive rnargins, etc. Fourth, the volume series for the component items of business sector domestic sales - consumers' expenditure, public .current expenditure (-excluding public services), public and private fixed investment (excluding the North Sea) - are measured at factor cost inclusive of the relative price effect. · The price of business . *sector dome~tic sales is the basic domestic price variable ~n the system. Causal assumptions Variables in the model are classified into four groups : (a) exogenous variables ass~~ed to be determined either by Gove91ment policy or by external circumstances which ~ve do not seek fot"rnally to explain. (b) endogenous.variables determined by identities. (c) endogenous variables determined by behavioural relationships for which explicit hypotheses are provided. These hypotheser~ embody key assumptions about how the economy functions as ~n in~.er-depend~nt ...., system· The econometric procedure used to determine th,em is discussed in the next section. (d) semi-endogenous variables. These variables are regarded as bein& determined in part by external circumstances which are exogenous to the model and in part by other variables of the system. For example, a mainly exogenous _v,.ariable might be assumed to adjus~. in money terms to general price inflation. · Formally such variables are treated in the same manner as fully endogenous variables of type (c) above, but * See EPR No.2., pp. 96-98 for data sho~ing the reconciliation of CEPG definitions with national accounts for 1974. / - 4- the bebavieurat~hypotheses are·only expected to provide a partial · · "1:· i "'.. ::~,. .· -explanation.of. -their·movem.ent-over time. , · .. I' . The -model~ ·thus' defined, is our representation of the economic system. It ·can be used both·· to interpret the, causes of past developments and to obtai~ :conditio':'-:~· prediction~ ~f the . effects, past or future, of alternative polides and e~t.ernal circumstances. Its· structure is verified in two main ways. First, the actual past values of variables pred~cted by behavioural '" hypothe:aes are compared . with. the values"' which would be predicted by the equations; taken one at.~ ·time, .in the absence of disturbances or 'residual errors'. This test is str~ngest when applied for data which have not been used to· esti~te. a:riy parameters in the equations, and we generally reserve data for the most recent past year for this purpose. The second kind of check on the model is to examine its properties as a complete system - for example, -the response to an increase in export demand - to ensure that the overall behaviour of the model is in reasonable accord with what might be inferred fro~ past experience. This is an important check because a set of hypotheses each of which seems plausible on its own may easily give implausible results when the hypotheses are combined. Treatment of behaviou~al relationshi~s J .., The general form of behavioural relationships specified in the model is g(y) · a 0 ~ a1t + f(p,x) +u ; g(y) ~y or g(y) = ln y where y is the dependent variable, a 0 and a 1 are 1t1'end' parameters, t is a linear time trend, f is a (non-linear) function of parameters p and current or lagg;d values of other variables x , and u is a disturbance term. The values of structural parameters p are generally obtained· from - 5- the results of time-series estimation conducted separately. * The values of the trend parameters a and 0 are obta1·ned as OLS+ est1·mates of g(y)- f(p,x) = a 0 + a1t +u over a uniform time-period.~ Two main advantages derive from incorporating linear trends into the specification of behavioural relationships. First, it permits a convenient display of off-trend past behaviour in which, writing an asterisk for trend values, the values of each dependent variable can be analysed as g(y) - g* = f(p,x) - f* + u A quick check is then possible of the extent to which the structural hypothesis f(p,x) explains past fluctuations about trend of g(y). The second advantage is that projections of the behavioural relationships for future years will generally be rather robust in that they will not be very sensitive to the exact values specified for p · This is demonstrated by the following algebraic theorem Consider an equation with one explanatory variable and, for a given pre-specified value of the structural parameter a , * These estimates are often based on more complex stochastic specifications (e.g. first or second order serial correlation or moving-average disturbances) and may also make use of additional specification of the-function f which is not incorporated in the model because of its limited relevance or cost in terms of adding extra variables. + More general estimation procedures have not so far been used at this stage in order to keep dmvn computing costs. The period 1962-74 was used in the March 1977 version of the model. But note that in some cases (e.g. North Sea prices) shorter series (1970-74) have to be used, because the activity did not exist over the full period. I - 6--· A . - . . , · · ···-llo>.';:.\-, 0:;~,:>Y; . :· of·a a adefine . 0 (8) ::~~;.' ~l?~(:~?;}~;as :conditional OLS. estimators of -;: ;~ '.;· ·..::loo:.;,.~~~"· and 0 1 obtained by regression · e~· 0 ·+ . a1 t +,. 'ut (tt:T ) 0 on observations for a past period ·T 0 "" .... ·Define yt (B) a (B) + a (B)t +ex· 01 t . ·" .l;lS the set of predicted v~lues implied bY" the.:<regression for some future i' ·period, T1 , con4itiona1· on assumed values of xt and on B · Define the 'trend' value of the ex.planat;_ory variable over'the future period T1 as where Y 0 and · l 1 · are· OLS estimates obtained ·'by regression over the past period T of 0 .' xt · Y0 + Ylt ..+. Vt (tT ) 0 Ill It can then be shown thae for·any two alternative pre-specified parameter :_. I \values, Bl and B2 ,_ the· difference between predicted values obtained by the above method can be expressed as ;· Hence the difference in pr.~dicted values of the dependent variable is proJ>ortional tQ the devi;;~.tion of xt from its trend value~ In particular, if x lies on its trend, i.e., if it"' x*t .,_then Yt ((:\) · Ye (82), and the predictions are invariant to the pre-specified value of B .* * This method embraces situations where 6 has been estimated without a trend term for the same ~ast period as above, i.e. T ; in this case the gen estimated eralise to 'vthaeluesitoufatiao1n(Bo) fwiKll(lbinee4zer)r o. ex The resSlt can be planatory variables seen to byAnoting that each variable.can be considered one by one after redefining yt to allow for the influence of variables already considered; we eventually obtain ·.where a-. l - 7- More generally if the deviation of xt from its trend value is small, the predicted value y.t will be insensitive to sw..all chang~s in the pre-specified value of the structura.l parameter B Although t~is property is convenient for projections when e"~lanatory variables stay close to trend, not too much should be made of it. In particular it has no relevance at all ~o ~omparisons between alternative projections for the same future year for \'i(h:i.ch purpose reasonably accurate specification of values of structural parameters i~ essential. In practice the above procedure for obtaining conditional predictions for future years may need some modification. The record of residuals in behavioural equations is examined to see tvhether current residuals ., are likely to persist in future years; future disturbances, u , are then either assumed zero or carried forw2rd by a serial correlation process, starting from the latest past value. >-lith a pdori coefficients. T.n the case of semi-endogenous variables (a11d whe_re there are evident reasons for so doing, in the case of one or two fully endogenous variables) the trend may be modified, or the entire term a 0 + e11t· + u may be ovarwritten for future years. / Solution For given values of exogenous variables, including trend parameters and assumed future residuals, the model is then ready to be solved year by year to obtain values of endogenous variables. Unless the pattern of mutual dependence of endogenous variables can be reduced to a triangular structure by appropriate ordering of equations, no simple sequential solution to the model is possible. If equations are evaluated in a given order values of some endogenous variables will then be required before they have been determined in an equation. Such variables are termed 'simultaneous' variables. The procedure we follow to obtain a consistent solution is to modify trial values for such variables until they correspond to a high degree of accuracy with the values subsequently determined wh~n the equations for the variables ·are evaluated. .' The method of solution also permits us to specify any subset of exogenous variables (up to a certain size) as instruments whose values in each year are to be determined such that a subset of an Elqual number of endogenous variables attains target values in that year. In addition there is a facility for adjusting the values of a va~iable in two given years to achieve a target in two subsequent years. * The possibility of defining a set of instruments to achieve given targets is of course limited by the ,· l structure of the model itself, because certain combinations of targets may not be feasible with the defined set of instruments. * For the three strategies presented in EPR No.3, targets and instruments are as follows Conventional poiicies Restriction of imports and devaluation~-------------------------------------------- Targets Instruments Targets Instruments BB DTWl BB DTWl IRCH RX IRCH RX u MCON In the devaluation case the level of export competitiveness (IRCH) ts adjusted in 1979 and 1982 to meet targets for business output (QUK) in 1981 and 1985. .g· - A consistent s~lut:l.on of.the model requires first, that final values .' of simultaneous var.iables equal the values supplied before sequential evaluation ·of the equations, and·second·that pre-specified values of target variables are attained-setting appropriate values of instruments. Thus, adopting the following notation , y' 0 t "~o , Yo ' initial, final ~d. target values of target simultaneou~ ~ariables y1' ' yl initial and final val~es of other simultaneous variables .,2 ' y*2 . z' - final and target values of other target variables va~ues of instruments a consistent solution of the model is obtained by finding initial values ·, ~ y. ' 0 · · .y-' 1 and z' such that the following conditions hold to an acceptable degree of accuracy * *Yt 0 · y 0 · y 0 ! y. ' 1 · - y1 ' 12 · y 2 The ordering of equations in ,the model is chosen, with the aid of a special-purpose computer program, such that the number of simultaneous .variables is minimised; in ce-rtain straightforward cases it is possible to redw:e this ~- futtlr.4tr by· analytic substitution in the structural ·equa:t1·o· tts.o * With the current model there are nine simultaneous variables - QUK, PUKt , PRUK' , NR' , PC" , TW, MMUK., U and RI25 (see Part II for definitions) _10 ~ .Solutions satisfying the above conditions have. readily been computed. for the current version of the model using a first-order linear ·approximation. Writi-qg y' - y u. 0 0 y'1 - y1 *y0 - y0 12 - Yz* '"'·· ~~]and J · ' ; V · [::~1 "' we~: start with a trial set of initial _values, v , and iterate on 0 v·· l. v. 1. - 1 - J -1u(v.) l i .. 1,~, ··· where J is estimated numerically at each step of the iteration until !uf is acceptably small.* The facility for solution with one variable adjusted in two given years to meet future targets is achieved by repeated modification of trial values of the variable followed by solution of the model as described above. + * Solution of the current model with 9 simultaneous variables and up to 3 targets to a high degree of accuracy requires not more than six iterations and less than i second CPU time for each year on the University's IBM370/165 computer. + The CPU time required for this solution is nearly 2 seconds per year. - 11 .. II The Model The overall struetwre of the model is similar to that of most aggregative Keynes~an models. Prices and volumes of expenditures determine output and factor incomes, which are then redistributed, "'- < mainly via the tax system, as disposable incomes. Private expenditure in money terms is mainly determined by frivate disposable incomes, public expenditure on goods and services is deter.mined in real terms by government decisions, while imports and exports are determined by demand and relative costs or prices (unless import restrictions are assumed to be in force). Prices are determined by costs and prices of exports And imports are also influenced by the relativity between domestic and world price levels. Labour costs are determined mainly by wage settlements, which are themselves the outcome of a model of a bargaining process*· Table 1 below illustrates the stL~cture of the model in terms of the extent of interdependence between its various sections. The variables of the model have h1.en defined in order to conform to the general atcounting principles set out above in Part I; the past data of the mode1 have therefore been constructed by modifying offi<;ial published data in accordance with those principles, which also dictate the framework of accounting identities within the model. The equations of the model are fully described below under the following headings 1. Private expenditure 2. Balance of payments 3. Public sector 4. North Sea 5. Employment. 6. Earnings See EPR No. 2, Chapter 2. 7. Prices 8. Stockbuilding and stock appreciation 9. GDP identities 10. Money supply and DCE Table 1 Section Number of endogenous variables determined in the section ,,>' The structure of the model Number of endogenous Total number of variables which appear endogenous as explanatory variables, variables but are determined in determined in other sections other sections Number of exogenous variables ~,' 1 2 3 4 5 6 7 / ..., 8 .9 J 10 11 39 27 13 4 10 9 5 4 5 1 2 3 4 5 6 7 8 9 10 6 91 0 1 1 0 1 1 4 23001111 -5 11 6 2 2 1 3 1 '1 0 30 00 1000 0000 0 0 0 10 20 201 00 10 0 42 10 1 0 10 0 100 00 2 10 4, 4 6 ~ 0 0 1 2 0 3 21000100 20: 13 32 4 1 6 9 4 23 7 6 25 35 12 4 7 5 1 9 3 Total 127 16 31 20 16 3 4 8 6 7 3 ?j * * A number of exogenous variables appear in more than one section. The total number of variables in the model is thus 127, + 7l' = 200 Each section shows the equations which determine values of endogenous variables, followed by an alphabetical list of definitions of all the variables appearing in the section. The term 'tr' in a behavioural equation represents the expression a + a t + u , where 01 a 0 and are constant and trend coefficients and u is a residual as described above in Part 1 (p. 4). Values of these coefficients estimated from currently available data are tabnlat~~ in Appendix I. All equations in which no such term appears are identities. The symbols in the lists of definitions are followed by either an equation reference number for an endogenous variable, or the symbol (ex); which denotes a variable exogenous to the model. The following 13 - notational c:mventions are adopted for. the units in which variables are measured : £m £million at current p·rices £1970m £million at 1970 prices th ·thousands de£1 ratio of current money value to value at 1970 prices (may diffe}:" from unity in 1970 if e.g. the deflator in que~tion is the ratio of a current market price.series to the ratio corresponding 1970 factor cost series) ratio of two variables expresse<i ~n the same index units, e.g. effective tax rates, index number, generally based on 1970=1.0 (p. 2 ) As exph:.i.ned in Part ·:r- ·above, l expenditures may be valued at 'full cost', in addition to conventional measures at factor cost and at '., market prices. The foll:>wing notational conventions are adopted for e::-.-penditure ) series ~- Constant (1970) factor cost Current :ull cost Current :narket prices no superscript (e.g. C for consumption at 1970 factor cost) single prime (C 1 ) double prime (C11 ) Any exce:Jtions to this convention are noted where they occur. .: Flows of income measured in current money ter!lls are v1ritten with a single prime superscript. Appendix II prov1· des an overa11. ~nde~ kA of the variables used in the model - 14- 1 · Private expenditure This section discusses the equations which are used to predict private consumption and fixed investment (excluding the North Sea). Previous work by the CEPG, based on analysis of post-war data from 1954 onwards, has emphasised the stability of total private expenditure in relation to total private disposable income. The original formulation, presented in evidence to the House of Commons Expenditure Committee*, expressed real private expendi- ture as a function of current and lagged real disposable private income and certain monetary variables - hire purchase credit, personal bank advances, and increases in the book value of stocks. This relationship has since been reformulated in'current price terms, the correct specification if private sector behaviour is regarded as a process of adjustment of net desired holdings of publ ~. c and overseas f.~nanc1. al assets to ~. ncome+ · This overall relationship (the main role of which is to permit inferences to be drawn about the appropriate stance of fiscal policy) has been disaggregated in 'two main ways expenditure is divided between consumption and fixed investment, and each of these is a function of current and lagged levels of three types of private disposable income - wages and salaries, household grants and property income. The conventional definition of disposable property income (YR') used generally in the model is here adjusted by deducting net non-North Sea private investment abroad, which corresponds to the addition of net intra-company investment abroad to private expenditure in the original formulation presented to the Select Committee. The justification for this is that such investment should be treated as expenditure on goods, rather than as acquisition of financial assets, as implied by the conventional definition. Here the analogous modification has been made to the definition of property income, although using a wide definition of capital flows. Its implication is that domestic * Cripps, Godley and Fetherston, 'Public expenditure and the management of the economy', Ninth Report from the Expenditure Committee, Session 1974, HC 328. + See EPR No.2, Chapter 6. ... ,_ 15 - investment can be financed directly by inward flows of private capital (rather than by property income itself), whilst outward capital flows constitute a drain on domestic investment. A further adjustment to disposable property income is made to exclude depreciation due to foreign oil companies, which in the national accounts is treated as a capital outflow and not as part of income paid abroad. An additional term in the investment .. equation allows for the small amount of UK income which is used to provide equity finance for the North Sea. The coefficients on the various categories of income were derived from analysis of data since 1960, imposing a priori the coefficients on household grants and hire purchase debt, and the constraints that the coefficients on current and lagged values of each category of income should sum to unity. Thus the equations overall retain the property of an approximately one-to-one '· relationship between increases in private income, and the subsequently generated increase in private expenditure. The principal influence of the disaggregation o~ income is on the timing and nature - i.e. whether in the form of consumption or investment - of the expenditure generated, rather than on the overall amount of such expenditure. The term on wages and salaries . in the investment equation represents the influence of disposable wage incomes on dwellings investment, whilst the consumption equation includes the effect of consumption out of dividends and interest. Earlier formulations of the aggregate relationship for private expenditure included as one of the explanatory variables the increase in book value of private stocks and work-in-progress,· i.e. stockbuilding plus stock appreciation, with a coefficient of almost unity. This incorporated the hypothesis that companies borrow more or less one-for-one with increases in book values of stocks, so that this factor represents a virtually automatic source of finance to the private sector. Stockbuilding was also included as part of private expenditure. The implication of this procedure was that the implied overall - 16 - relationship between private expenditure and private ~ncome could be disturbed either by fluctuations in stockbuilding or stock appreciation; but it was clear that the relationship might not be appropriate in periods of rapid inflation and high stock appreciation, on which firms might not wish to borrow in full (nor banks to lend) to finance spending as in less inflationary periods. The current specification embodies a modified hypothesis about the influence of stocks which has been found to be consistent with past data the absence of any stocks term t:rom either side of the equations implies that firms are able to borrow to the full extent of any stockbuilding which they undertake (which may be regarded as a normal cyclical phenomenon), but do not borrow at all (or possibly only up to some constant amount) on stock appreciation (which could not be described as a normal cyclical phenomenon after recent experience). Stockbuilding thus represents a source of cyclical disturbance to the overall behaviour of private net acquisition of financial assets (after deducting stockbuilding), whilst stock appreciation has no direct effect. Nevertheless, the rate of inflation does play a key role ~n determining the magnitude of the private financial surplus : for a given rate of growth of ~ income, the effect of the lags in the equati~ns is to generate a larger private financial surplus, the higher the rate of inflation. Conversely, as the rate of inflation moderates, the proportion of disposable income required to sustain the desired relationship between holdings of financial assets and income falls. Further work has been undertaken on the role of monetary variables in the relationship between private income and expenditure. He have found some .evidence that the ratios of both cons~~ption and investment to private disposable income are positively related to movements in share prices, and have p:rOxied this "wealth effect" with negative coefficients on long-term interest rates. The consumption and investment equations both now contain a term which captures the impact of credit restrictions (measured by an index of credit stringency). __,., ... - 17 - Equations 11.1 1n C" = tr + ln ~.55YW' + 0.41YW~ + 0.95YH' + 0.05YH:1 + 0.23(YR' + KFUK' - KUKF' - ANSF.PMM') + O.lO(YR-'1 + KFUK-'1 - KUKF-'1 - ANSF_~.PMM: 1 ) + 0.25(YR:2 + KFUK:2 - KUKF:2 - ANSF_2 .PMM:2) +HP' j - 0.15 1n (1 + RI25) - O.OOSQRB 1.2 C' _ ~' - TTC' 1.3 C _ C'/PUK' ~1.4 1n IPUK" = tr + ln lo.04YW' + 0.19(YR' + KFUK' - KUKF' ANSF.PMM') J+ 0.23 (YR~ 1 + KFUK:1 - KUKF:1 - ANSF_1 .PMM:1) - KUKNS .PHM' -0.6 ln (1 + RI25) - O.OOSQRB 1.6 IPUK :: IPUKt /PUK' 1.8 YH' : GRH' - TTH' ... --~ "' __1 · 9 YR' ;::; PNSUK' + PRUK' + PFUK 1 - PUKF ~ + NR t + GRRC 1 \. ,./ + GR.RI .PUK' - TTR'. 1~10 . PRUK' :::: QUK' - TPPG' .... WBUK' 1 .. 11 NR' - NG' - ~' - 18 - ANSF ccst c (ex) (3 .4) (1.3) Foreign oil companies' depreciation allowances {£1970m) Income from employment in public services {fm) Consumers' expenditure (El970m) C' (1.2) Consumers' expenditure (£m at full cost) C" (1.1) Consumers' expenditure {£m at market prices) GRH' {3.14) Household grants (fm) GRRCt (3.17) Other current grants to private sector (fm) GRRI (ex) Capital grants to private sector (£1970m) HP' (ex) Net increase in consumer hire purchase debt (fm) IPUK (1.6) Private fixed investment, excluding North Sea (fl970m) IPUK' (1.5) Private fixed investment, excluding North Sea (fm at full cost) IPUK." (1.4) Private fixed investment, excluding North Sea (fm at market price KFUK.' (2.32) Long-term private capital inflows to business sector (fm) KUKF' (2.33) Long-term private capital outflows (fm) KUKNS (ex) UK private equity finance of North Sea investment (fl970m) NF' (2.28) Public sector net payments of interest and dividends abroad (fm) ,, NG' (3.22) Total public sector net payments of interest and dividends (fm) NR' (1.11) Private sector net receipts of interest and dividends from public sector (fm) PFUK.' (2.27) Private property income and transfers received from abroad (fm) PMM' (2.17) Price of imports of finished manufactures to UK business sector (d.e£1.) PNSUK' (4.11) North Sea profits paid to UK, after tax (fm) PRUK.' (1.10) Gross private profits of UK business sector, including private rents and income from self-employment, after stock appreciation (£m) PUKF' (2.26) Private property income and transfers paid abroad from UK business sector, before tax (fm) PUK' (7.1) Price of business sector domestic sales (def1.) QRB (ex) Degree of credit restriction (O=no restrictions, 2.5=severe restrictions) QUK' (9.2) Business sector output (fm at factor cost) RI25 (10.4) yield on War Loan, average for the year TI (ex) Effective rate of sales tax on business sector fixed investment and sales to North Sea (ratio) TPPG' (3. 21) Gros·s trading surpluses of public corporations and other public enterprises, after stock appreciation, and public sector rent (fm) TTC' (3.18) Net sales tax revenue on consumers' expenditure (fm) TTH' (3.11) Direct tax on household grants (fm) TTR' (3.12) Direct tax (including national insurance contributions paid by the self-employed) on property income (£m) - 19 - TTW' WBUK' YH' YR' YW' (3. 9) Direct tax and national insurance contributions on income from employment (fm) (6.10) Income from employment in business sector (fm) (1.8) Disposable household grants (£m) (1. 9) Disposable property income (fm) (1. 7) Disposable income ~rom employment (fm) - 20 - 2. Balance of Payments This section describes the components of the current account of the balance of payments, basic balance on current and long-term capital account, and the balance for official financing. For the analysis of trade in goods and services, exports are divided into two categories in order to treat exports of fuels separately from the rest (mainly manufactures and services) whilst imports to the business sector are divided into seven categories food, drink and tobacco, fuels, basic materials, semi-finished manufactures, finished manufactures (excluding U.S. military aircraft), u.s. military aircraft, and other imports (mainly services). Both imports of finished manufactures and non-fuel exports are influenced by capacity constraints · (a) Exports of goods and services · {' Exports of fuels in volume terms are projected exogenously on the basis of the projections of North Sea production. The volume of other exports is determined by world trade and the average level of costs of UK exporters expressed in foreign currency relative to the world price of manufactures. The implied elasticity of the UK's share of world trade with respect to the growth of world trade is -0.22 , which together with the effect of the tren ,.. term in the equation implies, assuming no changes in cost competitiveness, that with world trade growth at 9% per annum, the UK's share would decline by 2!% per annum; world trade would need to fall by over 3% per annum in order for the UK's share to increase. Non-fuel exports are reduced by !% for ~very 1% by which business output exceeds capacity. The elasticity of exports with respect to cost competitiveness implies a long-run elasticit· of total exports with respect to export prices in foreign currency of about -2.3 (see (c) below). - 21 - (b) Imports of goods and services Imports of food, drink and tobacco and of services are projected exogenously; imports of U.S. military aircraft are merely present as an adjustment to past data. Imports of fuels are projected on the basis of the amount and composition of North Sea production in relation to domestic energy requirements and fuel exports, with allowance made for the sensitivity of energy requirements to the level of business activity. Imports of basic materials are determined by the stockbuilding cycle. Both of the equations for manufactures contain both demand and lagged relative price terms : the demand terms are business output and the ratio of stockbuilding to output in the case of semi-finished manufactures, and business sector final sales for 'finished manufactures. The model now incorporates a saturation level for imports of finished manufactures of 40% of total business sector final sales; the volume elasticity with -----~-----------··e··----- r-e--s--pe--ct to f---i--na-l sa-les--.-i-s-- given by the formula 3 - 28 where S (= t+e) is the ratio of actual imports to the saturation level and is equal to 2.7 at the 1976 value of S Capacity constraints are assumed to increase the volume of imports of finished manufactures, with a rise of 3(1 - S)% for every 1% by which output exceeds capacity. Quantitative import restrictions are incorporated into the model simply by assuming that imports of finished manufactures are reduced to the required degree (shown by MCON) below the level with which they might otherwise be expected to attain. This assumption is made in order to simplify solution of the model in this case : in practice some restrictions might be applied to semi-finished rather than finished manufactures. -The identities for MUK and M show the definition of total imports to the business sector and total imports as conventionally measured (including North Sea imports from abroad). The implied elasticity of total imports with respect to import prices 1.n sterling (see.(c) below), based on 1976 weights, is about -0.15. - 22 - (c) Export and import prices The prices of exports and imports of fuels are both related to the world price of fuels expressed in sterling, allowing the quality differential for UK fuel exports to be maintained in the future. Prices of other categorie of exports and imports are determined, with a la~,partly by domestic costs (adjusted for indirect taxes) and partly by foreign prices, expressed in sterling, depending on the extent to which the UK acts as a price-taker on world markets in the various commodity groups. For exports, and imports of finished manufactures and services, the foreign price variable is an index of world prices of manufactured exports, while for food and basic materials an index of world prices of food and materials is used. A weighted average of the two foreign price indices .is used in the equation for the price of semifinished manufactures. The relationships also allow for different lengths of lag in the adjustment of prices, with the lag being longest in the case of finished manufactures. Overall these price relationships imply (on the basis of 1976 weights) that the long-run effect of a 1% depreciation of sterling, allowing for the effects on domestic costs of changes in the cost of imported inputs but assuming no effect on money wage settlements, is to increase sterling export prices by 0. 63% ·and sterling import prices by 0. 79%. (d) Current balance The first part of this section contains the identities necessary to derive the balance of trade in goods and services, expressed at current prices. The ~ifference between the current balance and the balance on goods and services comprises net property income and transfers from abroad, or 'overseas sector disposable income' with the sign reversed. Private interest, profits, dividends and transfers paid abroad from the business sector, measured before tax, are related to total private business - 23 - factor income; North Sea profits paid abroad are treated separately (see section 4). The corresponding inflows are projected in relation to the level of activity and of prices of manufactures in the world economy. Public sector interest payments are determined by the cumulative total of deficits on the basic balance and the level of world interest rates which determine the terms on which overseas borrowing is made. Government transfers abroad are projected in volume terms on the basis of the Public Expenditure tVhite Paper and linked to general inflation. (e) Basic balance The basic balance of payments on current and long-term capital account (converted to foreign currency) is used as a target variable in EPR No.3. Public sector-net long-term capital inflows are projected exogenously, whilst capital inflows to the North Sea are discussed under Section 4. Other private inflows and outflows are projected in relation to the corresponding reverse flows of private property income, since a substantial proportion of profits earned by UK companies abroad, and by foreign companies in the UK, are retained to finance investment rather than repatriated to the host country. Net trade credit is derived from changes in gross import and export credit outstanding resulting from changes in e~~orts and imports and in trade credit ·' ratios. (£) Balance for official financing Short-term capital flows are related Ln absolute terms to the current balance of payments and to interest-rate differentials and LTK relative cost competitiveness, with national income as a scaling factor for the last two items. The balance for official financing is further discussed in section 10 as a source of finance for the public sector borrowing requirement. - 24 - (g) Business capacity Capacity output of the business sector is calculated on the basis of three assumptions about business planning : (i) that in each year the trend level of output two years ahead is predicted by an extrapolation of the logarithmic trend fitted over the previous two business cycles (i.e. the past eight years) (ii) that a 5% margin is allowed to cope with above-trend demand (iii) that the indicated full capacity level of output assessed in this way becomes operational by the time the year in question is reached · ., .·. - 25 - Equations (a) Exports of goods and services 2.1 ln XX = tr + 0.78 1n WF - 1.18 (0.2 1n IRCH + 0.8RCH_1) - 0.5 0 where 0 = ln (QUK/QUKK) if QUK > QUKK = 0 otherwise 2.2 RCH : 0,4 1n IRCH + 0.6RCH_1 2' 3 IRCH = PUK' - (1 + TX ) RX PWF' 2.4 X - XX + XF (b) Imports of goods and serv1ces 2.5 MF = tr + 0.029 QUK 2.6 HB = tr + 0.14 S 2.7 In MS = tr ~ 1n QL~ + 0.3 RCS + 2.5 S/QUK 2.8 MMUK : MCON. -1- +-a -~ C.t :y ln 8 = tr + 2 ln y + 1.5 RCH + 3.0 (/; y :: 0.4 (QUK + XNS + HUK) (/; is as defined above for XX t 1' 2.9 RCS - 0.5 ln PUK' (l+T;iS)PHS j + O.SRCS -1 2.10 RCH = 0.7 ln[-(l+TPHUi·K1')PNH'.J + 0.3 RCM_1 2.11 HUK HA + HF + HB + MS + HHUK + MVUK + MAC 2. 12 M _ MUK. + MHNSF + MVNSF (c) Export and import prices Excluding fuels, the general form 1s (P~"'K'ln p = tr + a 1 ln pf + (1 - a 1) 1n p£_1 where ln pf = a 2 ln ) + (1 - a 2) [a 3 1n PAF' + (1 - a 3) 1n PWF' - 1n RX] - 26 - 2.13 Exports p PXX' al 0.67 a2 a3 T 0.50 0 1 1 + TX .Imports 2.14 Food, drink & tobacco PNA' 0.50 0.10 1 1 + TMA 2.15 Basic materials PMB' 1.00 0.10 1 1 + TMB 2.16 Semi-finished PMS' 1.00 0.20 0.7 1 + TMS f manufactures 2.17 Finished manufactures PMM' 0.20 o. 70 0 1 + TMM 2.18 Services PMV' 0.80 0.20 0 1 For fuels .. 2.19 ln PXF' = tr + 1n (PFF'/RX) 2.20 PMF' PFF'/ RX ,, (d) Current balance 2.21 X' - XX.PXX' + XF.PXF' 2.22 X" - X' (1 + TX) 2.23 MUK" =: MA.PMA' (1 + TMA) + MF.PMF' (1 + TMF) + MB,PMB' (1 + TMB) + MS. PMS ' (1 + TMS) + MMUK. PMM' (1 + TMM) + MVUK. PMV 1 + MAC 1 l; . 2.24 M' =: MA. P~fA 1 + MF ·PMF ' + MB. PMB ' + MS ·PMS ' + MMUK. PMM' + MVUK. PMV' +MAC' + MVNSF" + MMNSF' 2.25 BT': X" - M' 2.26 ln PUKF' = tr + ln PRUK' 2.27 ln PFUK' = tr + ln (Pt.JF'/RX) +2.0 1n WF 2.28 NF.' = t~ - RIF. SBBW 1 2.29 2.30 SBBW' =: SBBW 1 _ 1 + BB'_1 .RX. YF' - PNSF' + {1- TF).PUKF'- PFUK' + NF' + GRF' 2.31 B' BT' - YF' (e) Basic balance - 27 - 2.32 2.33 2.34 2.35 2.36 ln KFUK' = tr + ln PUKF' KUKF' = tr' + 0.4 PFUK' KTRC' - RKTX.X" - RKTX-1X-"1 - RKTM.M' + RKTM_1 .M'_1 BB' - B' + KFUK' - KUKF' - KTRC' + KGF' + KFNS.PMM' BB - BB I. RX RX1976 (£) Balance for official financing ~0.252.37 KWR' = tr + (Rr - RIF) + 0.14 (l - IRCH)J (YR' + YW' + YH' + YG') + .0.6 B' 2.38 BOF' : BB' + KWR' (g) Business capacity QUKK is computed as 1.05 multiplied by the extrapolated value of a logarithmic trend fitted by OLS to previous values of QUK. This may be expressed as a weighted sum of values of QUK by the formula I~ S 12.39 QUKKt = 1.05 exp , K=l 1. (4 + 6a ) .· 13 S-1 - K.6 (Za B(S-1) + B-1) (S+l) (.ln ~ QUK t-K-a+l_, ·~ __. where the trend is fitted over B periods up to QUKt-a (a=2 and S=8) B' (2.31) Current balance of payments (£m) BB (2.36) Basic balance of payments in foreign currency units (millions) BB' (2.35) Basic balance of payments (fm) BOF' (2.38) Balance for official financing (fm) BT' (2.25) Balance of trade on goods and services (£m) GRF' (3 .16) Government current transfers abroad (£m) IRCH (2.3) UK export cost competitiveness (ratio) KFUK' (2.32) L6ng-term private capital inflows to business sector {£m) KGF' (ex) Net official long-term capital inflows (£m) KFNS (ex) Long-term net private capital inflows to North Sea (£1970m) KTRC' (2.34) Increase in net trade credit outstanding (£m) K1JKF I (2.33) Long-term private capital outflows (£m) KWR' (2.37) Net short-term capital inflows (fm) - 2S3 - M (2 .12) Total imports of goods and services, including imports to North Sea (£1970m) M' (2.24) Total imports of goods and services, including imports to North Sea (fm) (ex) Imports of food, drink and tobacco (£1970m) MAC (ex) Imports of US military aircraft (£1970m) MAC' (ex) Imports of US military aircraft (fm) MB (2. 6) Imports of basic materials (£1970m) MCON (ex) Degree of import restriction on finished manufactures (=1 with no restrictions) (ratio) MF (2.5) Imports of fuels (£1970m) MMNSF (ex) North Sea imports of capital equipment from abroad (£1970m) MMNSF' (4.7) North Sea imports of capital equipment from abroad (fm) MMUK (2.8) Imports of finished manufactures to UK business sector (f1970m) MS (2. 7) Imports of semi-finished manufactures (fl970m) MUK (2.11) Total imports of goods and services to UK business sector (£1970m) MUK" (2.23) Total imports of goods and services to UK business sector (fm at market prices) HVNSF (ex) North Sea imports of services from abroad (£1970m) . MVNSF" (4.5) North Sea imports of services from abroad (£m) ., MVUK (ex) UK business sector imports of 'other items'(mainly services) (£1970m) ,. NF' (2.28) Public sector net payments of interest and dividends abroad (f.m) PA.F' (ex) World price of food and materials in foreign currency, based on UN index (index) PFF' (ex) World price of fuels in foreign currency (index) PFUK' (2. 27) Private interest, profits, dividends and transfers received from abroad (£m) P}f.A I (2. 14) Price of imports of food, drink and tobacco (defl) PMB' (2 .15) Price of imports of basic materials (defl) PHF' (2. 20) Price of imports of fuels (defl) PMM' (2.17) Price of imports of finished manufactures to UK business sector (defl) - - 29 - PMS' (2.16) Price of imports of semi-finished manufactures (defl) PMV' (2.18) Price of imports of 'services' to UK business sector (defl) PNSF' (4.12) Post-tax North Sea profits paid abroad (£m) PRUK' (1. 10) Gross private profits of UK business sector (£m) PUKF' (2.26) Pre-tax private property income and transfers paid abroad from UK business sector (£m) l PUK' (7 .1) Price of business sector domestic sales {defl) PWF' (ex) World price of exports of manufactures in foreign currency, based on UN index (index) PXF' (2.19) Price of exports of fuels (defl) PXX' (2 .13) Price of exports of goods and services excluding fuels (defl) QUK (9.1) UK business output (£1970m) QUKK (2.39) UK business output capacity (£1970m) RCH (2. 2) Lagged relative export cost competitiveness (ratio) RCM (2.10) Lagged relative price competitiveness for imports of finished manufactures (ratio) RCS (2. 9) Lagged relative price competitiveness for imports of semi-finished manufactures (ratio) RI (10.1) Minimum lendhJ rate (previously bank rate), average for the year RIF (ex) Euro-dollar interest rate, average for the year RKTI1 (ex) Import trade credit coefficient (ratio) RKTK (ex) Export trade credit coefficient (ratio) RX {ex) Effective exchange rate, in weighted average foreign currency per unit sterling (based on official index in Economic Trends) (index) s (8 .1) Stockbuild (£1970m) SBBW.' (2. 29) Accumulated basic balance (£m, converted to foreign currency) TF (ex) Effective tax rate on private property income and transfers abroad (ratio) TMA (ex) Effective rate of protective duty on imports of food, drink and tobacco (ratio) TMB (ex) Effective rate of protective duty on imports of basic materials (ratio) TMF (ex) Effective rate of protective duty on imports of fuels (ratio) - 30 - TMM (ex) Effective rate of protective duty on imports of finished manufactures (ratio) TMS (ex) Effective rate of protective duty o'n imports of semifinished manufactures (ratio) TX (ex) Effective rate of sales tax on exports of goods and services (ratio) .. WF (ex) Volume of world trade in goods and services (based on OECD Index) (index) X (2.4) Exports of goods and services (£1970m) X' (2.21) Exports of goods and services (£m at full cost) X" (2.22) Exports of·goods and services (£m at market prices) XF (ex) Exports of fuels (£1970m) XNS (ex) North Sea sales of fuels to UK (£1970m) XX (2.1) Exports of goods and services, excluding fuels (£1970m) ,. YF 1 (2.30) Overseas sector disposable income (fm) YGt (3.25) Public sector disposable' income (£m) YH' (1. 8) Disposable household grants (f.m) YR' (1.9) Disposable property income (£m) TI{' (1.7) Disposable income from employment (£m) .... 31 - '\ 3. The Public Sector The model incorporates a full set of public sector accounts. (a) E;xpenditure on goods and services Current expenditure on goods and services is split into two components public service expenditure (CGS), i.e~ expenditure on wages and salaries charged to current account, and other (CGP). Public service expenditure is identically equal to public service employment multiplied by the average wage. Public service employment (measured in male full-time equivalents) is largely exogenous, being derived from the latest Public Expenditure White Paper, though it is assumed to vary to a small extent with unemployment, since the proportion of authorised posts filled will tend to be higher, the greater the number unemployed. Average money earnings per male full-time employee in public services are projected on the basis of an assumed relativity with standard average money earnings in the business sector. Other current expenditure and fixed investment, in volume terms, are derived from official projections in the Public Expenditure White Paper. Excluding the BNOC component of fixed investment in the North Sea, these series are inflated by the general deflator for business sector domestic sales (PUK' ). Public sector stockbuilding at current prices is derived as a residual from total and private stockbuilding. (b) Direct taxes Direct tax receipts (including national insurance contributions) are divided into four categories. For household grants and private property income paid abroad, tax revenue is derived by applying effective average tax rates to income. Tax on domestic property income (which includes income tax on self-employment and unearned income, as well as Corporation Tax) is calcuiated by applying the effective tax rate to estimated taxable income - gros$ income two years previously less investment allowances, and stock relief. 32 - ·' '' Direct tax on wages and salaries consists of both income tax ·and employees' .and employers' natio~al insurance contributions. Tax revenue is estimated by applying an exogenous marginal tax rate to total income from employment, and deducting from this sum the value of income tax allowances. (the average per capita value of allowances multiplied by the estimated *number employed at some stage during the year). ·. (c) Grants Household grants comprise all social security benefits and student maintenance grants. The average pension is linked, with a lag, to average money earnings. The numbers of persons receiving grants, excluding the unemployed, is expressed in terms of pensioner-equivalents (using as weights the ratio between average grant received in each category and the average ,. pension) and projected exogenously using Government Actuary statistics. Household grants are obtained by multiplying the weightednumbers plus 'the unemployed (similarly weighted) by the average pension. Other current and capital·grants to the private sector, and current transfers abroad, are all derived in volume terms from the Public Expenditure White Paper and linked tq general inflation. :: -~- ' ..... Indirect taxes, including sub~idies, ·a:re divided into ,' those which affect ·business costs- local :rates, protective autie~ and subsidies to public corporations- ~nd t_hose whicn do not, such as· VAT, specific duties and food. and housing subsidies. In the latter category sales taxes on· c~nsumption are split into three components : first, those which are income-elastic and.· are· assumed to vary with the value of expenditure (~ost of VAT~ car ta_x, .. betting and gaming duty and specific duties on alcoholic drink); second;· * In EPR No.3 the instrument of fiscal adjustment'used to meet future ta~gets is a package of tax changes based on a discretionary change in the average value of tax allowances (DTWI), with associated ch~nges in tax on domestic property income and sales taxes on consumption · (section (d.)) · - 33 - - other indirect taxes (specific duties other than those ori alcoholic drink, VAT on tobacco and hydrocarbon oil, and stamp duties), whose yield is projected in real terms, and third, subsidies, mainly on food and housing, which are projected ,in money terms on the basis of forecasts in the White Paper. For sales tax on other expenditure items, and also protective import duties, effective average rates of tax are projected exogenously. The contributions of these items to tax revenue appears in the expression for ,.·, public sector disposable incom~., YG' · Local authority rates are related to average earnings in public service employment; subsidies to public corporations move in line with general inflation, and are inversely related to real output. (e) Property income and debt interest Trading income and rent of public corporations and other public enter- prises are assumed to move in line with general inflation·and with movements in real output. Gross debt interest payments (NG' + NGC') are derived by multiplying the annual amount of debt on which interest i·~· paid by an average ·, interest rate which takes account of the fact that only part of the total debt bears the prevailing rate of interest while the remainder bears rates fixed at various times in the past. The latter rates change over time as debt matures and is renewed at currently prevailing rates, with the exception of irredeemable securities. These securities are excluded from the amount of debt on which interest is to be paid and the interest paid on them is absorbed into the constant term in the equation. Net debt interest is then derived by deducting interest receipts, which are projected to·move in line with inflation, from gross payments. Hinimum lending rate is related to the level of world interest rates (which is exogenous to the model) and to the rate of domestic inflation (see section 10). Public sector disposable income consists of revenue from taxes and from trading income, less all grants, transfers and debt inte.rest. The borrowing requirement is then obtained as total expenditure on goods and services minus - 34 - disposable income (equals the public sector financial deficit before capital taxes) minus taxes on capital plus asset transactions. The last item is split into three categories : net official long-term capital abroad, net lending by BNOC to North Sea operators, and other net lending · .. Equations ~ (a) Expenditure on goods and services 3.1 EGS - EGS* + 0.1 u 3.2 CGS - 1. 9302 EGS 3.3 WGS' - RWGSUK.WUK*' ,. 3.4 CGS' - WGS' .EGS 3.5 CGS" - CGS' (1 + TGS) 3.6 CGP" - CGP (1 + TCGP).PUK' 3.7 IG" - (IG-INSG) (1 + TI) .PUK' + INSG" 3.8 SG' - S' - SP' (b) Direct taxes ,. 3.9 Tn.J'' - - (TWl + DTWl) (EE + 1715 + 0.25U) + TW2 (CGS' + WBUK') 3.10 ln TWl = tr + ln PUK' 3.11 TTH' - TH.GRH' 3.12 TTR' - TRR.YRT' - 4800 DTW1 3.13 YRT' - PRUK' -2 + NR' - RWl. IPUK" -2 + RW2 .SAP' -2 - ARD' ·~ (c) Grants ...;.., 3.14 3.15 3.16 GRH' - GR(EH + U.RU) GR - WUK*' _1.RHW 1n GRF' = tr + 1n PUK' 3.17 ln GRRC' = tr + 0.81 1n PUK' - 35 - · (d) Indirect taxes 3.18 TTC' :. TC1(1 + D~i) -1 5 · .C' + TC2.PUK' - TSC' 3.19 3.20 1n TTRTS'= tr + 0.25 1n WGS' + 0.60 1n WGS'_1 1n TSPG' = tr - 1.0 1n QUK + 1.0 1n PUK' (e) Property income and debt interest 3.21 3.22 1n TPPG' = tr + 1n QUK + ln PUK' . NG' = tr + [o.92 (GD' + GD'_1).0.5- 45oo] [ 0.37 (0.75RI + 0.25RI) -1 + 0.63SRI- o.oos]- NGC' 3.23 1n NGC' = tr + ln PUK' 3.24 BG' ! CGP" + CGS" + IG" + SG' - YG' + KGP.PUK' + KGNS.PMM' - KGF '- TKK.PUK'- -- - 3.25 YG' -- __TTW' + TTH' +.TTR' + TF.PUKF' + TPNS' - GRH' - GRF' ,.,.,............. ~- - GRRC' - GRRI.PUK1 +TTC' + TX.X' + TGS.CGS' + TCGP. CGP .PUK' + TI [IPUK' +(MVNSUK" + MMNSUK") / (1 + TI) + (IG- INS~).PUK'] + TRNS' + TTRTS' ~ TSPG' + TMA.MA.PMA' + TMF .MF .PMF 1 + TMB .MB .PMB' + TMS .MS .PMS' + TMM(MMUK.PMM' + MMNSF') + TPPG' - NG' 3.26 SRI 3.27 GD' = 0.89 SRI_1 + 0.11 (RI_1 + RI_2).0.5 = GD' -1 + BG' - 36 - ARD' BG' (ex) (3. 24-) Value of capital allowances other than first year and initial allowances (£m) Public sector borrowing requirement (£m) C' (1.2) Consumers' expenditure (£m) CGP (ex) Public current expenditure other than public services (£1970m CGP" (3. 6) Public current expenditure other than public services (£m) CGS (3. 2) Public services expenditure (£1970m) i.e. wages and salaries on current account CGS' (3. 4) Public services expenditure (£m at full cost) CGS" (3 .5) Public services expenditure (£m at market prices) DTW1 (ex) Discretionary adjustment to average value of income tax allowances in future projections (£th) EE (5~3) Employees in employment (th. persons) EGS (3 .1) Public service employment (th. male full-time equivalents) EGS* (ex) Exogenous component of public service employment (th, male full-time equivalents) EH (ex) Recipients of household grants (excluding unemployed), in pensioner-equivalents (th.) (3.27) Outstanding stock of public sector debt (£m) GR (3.15) Average pension (£th. per annum) GRF' (3.16) Current government transfers abroad (£m) GRH' (3 .14) Household grants, i.e. social security payments plus student maintenance grants (£m) ' GRRC' (3 .17) Other current grants to private sector (£m) GRRI (ex) Capital grants to private sector (£1970m) IG (ex) Public fixed investment (£1970m) IG" 0. 7) Public fixed investment (fm) INSG (ex) BNOC direct investment in North Sea (£1970m) INSG" (4.13) BNOC direct investment in North Sea (fm) IPUK' (1.5) Private fixed investment, excluding North Sea· (£m at full cost IPUK" (1. 4) Private fixed investment, excluding North Sea (£m at market prices) KGF' (ex) Net official long-term balance-of-payments capital inflows (£m KGNS (ex) BNOC lending to North Sea operators (£197.0m) - 37 - KGP (ex) Other net lending to private and overseas sectors (£1970m) MA.PMA' (ex;2.14) Value of imports of food, drink and tobacco (£m) MB.PMB' (2.6 ;2.15) Value of imports of basic materials (£m) MF.PMF' (2.5;2.20) Value of imports of fuels (£m) MMNSF ' ( 4. 7) Value of North Sea imports of capital equipment from abroad (£m) MMNSUK"(4.6) Value of North Sea imports of capital equipment from UK (£m) MMUK.PMM' (2.8;2.17) Value of business sector imports of finished manufactures (fm) MS.PMS' (2.7;2.16) Value of imports of semi-finished manufactures (fm) MVNSUK" (4. 4) Value of North Sea imports of services from UK (£m) NG' (3. 22) Public sector net payments of dividends and debt interest (£m) NGC' (3. 2 3) Public sector receipts of interest and dividends (£m) NR' (1.11) Private sector receipts of interest and dividends from public sector (£m) PMM' (2 .17) Price of imports of finished manufactures to UK business sector (defl) PUK' (7 .1) Price of business sector domestic sales (defl) PUKF' (2. 26) Private property income and private transfers paid abroad (excluding North Sea profits paid abroad) (fm) PRUK.' (1.10) Gross private profits in UK. business sector (gross trading profits of companies, income from self-employment, and rent, after stock appreciation) (£m) · QUK (9 .1) UK business output (£1970m) RHW (ex) Relativity between pensions and average earnings (ratio) RI (10.1) Minimum lending rate (previously bank rate), average for the year RIF (ex) Eurodollar interest rate, average for the year RU (ex) Relativity between average benefit paid to the unemployed and average pension (ratio) RWGSUK (ex) Relativity between public service and business sector average earnings (ratio) RWl (ex) Effective rate of initial investment allowance (ratio) RW2 (ex) Proportion of private sector stock appreciation which is subject to tax (ratio) - 38 - S' (8. 2) Total stockbuilding (£m) SAP' (8.4) Private sector _stock appreciation (£m) SG' (3 .8) Public sector stockbuilding (£m) SP' (8.3) Private sector stockbuilding (£m) SRI (3. ?6) Average rate of interest on debt not turned over within one year .. TCl (ex)~ Effective rate of sales tax on income-elastic consumption goods (ratio) TC2 (ex) Real yield of other sales taxes on consumption (£1970m) TCGP (ex) Effective rate of sales tax on public current expenditure excluding public services (ratio) TF (ex) Effective rate of tax on private property income and transfers abroad (ratio) TGS (ex) Effective rate of indirect tax on public services expenditure (ratio) TH (ex) Effective rate of direct tax on household grants (ratio) TI (ex) Effective rate of sales tax on UK investment and sales to North Sea (ratio) TICK (ex) Revenue from capital taxes (1970m) TMA (ex) Effective rate of protective duty on imports of food, drink and tobacco (ratio) TMB (ex) Effective rate of protective duty on imports of basic materials (ratio) ·- TMF (ex) Effective rate of protective duty on imports of fuels (ratio TMM (ex) Effective rate of protective duty on inports of finished manufactures (ratio) TMS (ex) Effective rate of protective duty on imports of sem~finished manufactures (ratio) TPNS' (4.10) Revenue from Corporation Tax and Petroleum Revenue Tax levied on North Sea profits (£m) TPPG.' (3.21) ~Gross trading surpluses of public corporations and other public enterprises and public sector rent (£m) TRNS' (4.8) Revenue from North Sea royalties (£m) TRR (ex) Effective rate of direct tax on property income (ratio) · -TSC' (ex) TSPG' (3.20) TTC' (3.18) TTH' (3 .11) TTR' (3.12) TTRTS I (3 .19) TTW' (3. 9) TW1 (3 .10) Tt-12 (ex) TX (ex) - u (5. 4) HBUK' (6.10) 'YlGS I (3.3) V.'UK*" (6.1} YG 1 YRT' (2. 21} (3. 2 5) (3.13) - 39 - Subsidies on consumers' expenditure _{£m)Subsidies to public corporations (£m) Net sales tax revenue on consumers' expenditure (fm) Direct tax on household grants (fm) Direct tax (including national insurance contributions paid by the self-employed) on property income (fm) Local authority rates (fm) Direct .tax and national insurance contributions (employees' and employers'). on income from employment (fm) Average tax value of income tax allowances per employee (fth) Effective marginal direct tax rate on income from employment (ratio) Effective rate of sales tax on exports (ratio) Numbers unemployed (th) Income from employment in business sector (fm) Average money earnings per male full-time equivalent in public service employment (fth per annum) Standard average money earnings per male full-time equivalent in business sector employment (fth per annuu) Exports of goods and services (£m) Public sector disposable income (fm} Taxable property income (fm) - 4. The North Sea The North Sea accounts are constructed in accordance with the principles described in Economic Policy Review Nos. 1, Ch.4,and 3, Ch. 9. The volume of production of North Sea oil and gas, together with operating costs and imports of capital equipment, all expressed in real terms, are projected exogenously on the basis of latest available infomation, based on the work of Martin Lovegrove at 't·lood-Mackenzie, Edinburgh and of Jon Horgan and Colin Robinson at the University of Surrey. The pr~ce of North Sea oil is projected ·to move in line with the price of imported fuels with the price of North Sea gas assumed to rise with general ill( inflation. The effective rate of royalty payments is assumed to be 10% of total sales. North Sea output at current factor cost is defined as sales less operating costs less royalties, and forms the base on which taxes within the ring fence (Corporation Tax and Petroleum Revenue Tax) are levied. Post-tax profits paid abroad and to the ~K are projected on the basis of assumptions about the distribution of future production and profits between domestic and fo:ceign companies. The public (BNOC) component of North Sea investment is assumed to have the same deflator as total investment. Other relationships sho~vn below are required to generate various accounting magnitudes used elsewhere in the model to define fully the disaggregation of production between the North Sea, public services and the business sector. -· 41 - - Equations 4.1 QNS : XNS - MVNSUK - MVNSF 4.2 1n PNSG" = tr + ln PUK' 4.3 XNS" - (XNS- XNSG)PNSO.PMF'(l + TMF) + XNSG.PNSG" 4.4 ln MVNSUK" = tr + ln(HVNSUK.PMV') 4.5 ln MVNSF" = tr + ln (MVNSF .PMV') ~ . J' 4.6 ln MMNSUK" = tr + ln [ MMNSUK.PUK'(1-JTMM) 4.7 ln MMNSF' = tr + ln (MMNSF. PMM' ) 4.8 TRNS' - 0.1 XNS" 4.9 QNS' - XNS" - HVNSUK" - MVNSF" - TRNS' 4.10 TPNS' - PNS.QNS' 4.11 PNSUK' - SNSUK. QNS' (1 - PNS) 4.12 4.13 PNSF' INSG" - QNS' - TPNS' - PNSUK' - INSG [1.'111NSF' (1 + TMM) _+ MMNSUK'~ l'.iNNSF + MriNSUK INSG (ex) INSG" (4.13) }ft1NSF (ex) M11NSF' (4. 7) MMNSUK (ex) 1:-1MNSUK" ( 4. 6) MV'"NSF (ex) MVNSF" (4.5) HVNSUK (ex) HVNS1IT(" ( 4. 4) PHF' (2.20) PM.H' (2. 17) PMV' (2.18) BNOC direct investment in North Sea (f1970m) BNOC direct investment in North Sea (£m) North Sea imports of capital equipment from abroad (fl970m) North Sea imports of capital equipment from abroad (£m) North Sea imports of capital equipment from UK (£1970m) North Sea imports of capital equipment from UK (£m) North Sea imports of services from abroad (£1970m) North Sea imports of services from abroad (Em) North Sea imports of services from UK (£1970m) North Sea imports of services from UK (£m) Price of imported fuels (excluding protective duties)(defl) Price of imports of finished manufactures to business sector (excluding protective duties) (defl) Price of imports of services to UK business sector (defl) - 42 - PNS (ex) Rate of direct tax (Corporation Tax plus Petroleum Revenue Tax) on North Sea profits (ratio) PNSO (ex) Price of North Sea oil relative to price of imported fuels (ratio) PNSF' (4.12) North Sea profits paid abroad, after tax (£m) PNSG" (4.2) Price of North Sea gas (defl) PNSUK' (4.11) North Sea profits paid to UK, after tax (£m) PUK' (7.1) Price of business sector domestic sales (defl) ./ QNS (4.1) Gross domestic product of the North Sea (£1970m) QNS' (4.9) Gross domestic product of the North Sea (£m at factor cost) SNSUK (ex) Share of post-tax North Sea profits paid to UK (ratio) TMF (ex) Effective rate of protective duty on imports of fuels from abroad (ratio) TMM (ex) Effective rate of protective duty on business sector imports of finished manufactures from abroad (ratio) TPNS' (4.10) Revenue from Corporation Tax and Petroleum Revenue Tax levied on North Sea profits (ratio) ·, TRNS' (4.8) Revenue from North Sea royalties (£m) XNS (ex) North Sea sales of fuels to UK (£1970m) XNS" (4.3) North Sea sales of fuels to UK (£m) XNSG (ex) North Sea sales of gas to UK (U 970m) - . - 43 - 5. Employment Total employment is disaggregated into two categories corresponding to the production sectors of the model : public service employment and employment *in the business sector. Levels of employment in each of these sectors are measured in terms of male full-time earnings equivalents in order to allow for changes in the composition of em[>loyment : this procedure is followed . ·I ,<' to simplify the determination of the overall _wage and salary bill, which can be obtained for each sector as employment multiplied by average earnings per male full-time equivalent.· The conversion factor for numbers of persons relative to earnings equivalent employment· is positively related to variationa in business output, reflecting increased absorption of female and part-time employees at high levels of activity. The equation for business employment is derived as a reduced form from the follo?Ning underlying relationships (together with a term for the effects of SET in the past). = .A (ln EUK* - ln EUK-1 ) where L LUK = 0.9L} RE - EGS * = supply of labour to business sector (in full-time earnings equivalents) ·, The model incorporates an adjustment process for actual to desired business employmentJ EUK*, with desired employment determined in relation to output and the pressure of demand, following the hypothesis put forward by Godley and Shephe!d· + Labour supply enters in such a way that * North Sea labour costs are treated as part of imports of services produced in the UK business sector, to which is therefore attributed employment in the North Sea. Long-term growth and short-term policy, N.I.E.R. August 1964. - 44 - actual productivity in the medium-term varies about its long-term trend (4% per annum) in response to changes in the pressure of demand. (f\ = 0.6). The supply of labour enters into productive potential on a one-for-one basis, (that is, s2 = 1). In the expression for LUK, business sector labour supply, the coefficient 0,94 adjusts the conversion factor for employees, RE , to a conversion factor for employees and self-employed. Employment in public .. services is exogenous, apart from a small component related to the level of unemployment (see section 3). The expression for unemployment incorporates a marginal propensity to register as unemployed which varies inversely with the pressure of demand for labour in the economy, that is au -1.1792U dEE = L-EE-EESE Equations '-,. 5,1 ln EUK :::; tr - 0.015 SET' + 0,36 ln QUK + 0.24 ln(1 /(0.94 RE) - EGS*) .. + 0.4 ln EUK_1 5.2 ln RI!: = tr + 0.06 ln QUK 5.~ EE - (EUK + t:GS) .1lli 5.4 ln U = -1.931 + 1.1792 ln (1 - EE - EESE) EE (5.3) Employees in employment (th.persons) '·· EESE (ex) Self-employed (th.persons) EGS (3.1} Public service employment (th. male full-time earninga equivalents) EGS* ExvgenOt":l comv:nr cl.t ui p:lolic service employment (th. male full-time earnings equivalents) EUK (5 .1) Employment in UK business sector (th. male full-time earnings equivalents) L (ex) Total labour force (th.persons) QUK (9 .1) UK business output (£1970m) cs.RE 2) Relativity between numbers of p·.:rsons and male full-t;i.mo earnings equivalents (ratio) ,; (ex) Rates of Selective Employment Tax (index) u (5. 4) Unemployment (UK. wholly unemployed, excluding school leavei and adult students, annual average of monthly figures}(ti . - 45 - 6. Earnings This section describes the determination of average earnings and the wage and salary bill in the business se.ctor : income from employment in public services is discussed under the Public Sector (section 3). Standard (cyclically-adjusted) weekly earnings per male full-time *employee (WUK ') depend on a weighted.average of current and lagged values of wages at settlement for manual and noq-~anual employees. Adjustments are made for the effects of changes in normal weekly hours and of unconsolidated cost-of-living and threshold payments, The trend coefficient in the equation represents regular additional increases in earnings (about 2% per annum) due to wage drift and structural changes in employment. The construction of a wage settlement index for manual employees is descrL.bed L.n detaL. l elsewhere. * This index is scaled to be equal to standard '\o7eekly earnings (excluding all threshold payments) in 1974. The weights used in combining current and lagged values of this index to give standard weekly manual earnings vary as part of the adjustment of wage determination to changes in the rate of inflation, so that an increase in the rare of inflation increases the weight attached to current wage settlements. The weights also take into account the average time between settlements, the proportion of vwrkers covered by tvage settlements in the year, and the bunching of settlements at certain tim2s during the year. '· The weights for manual employees are obtained by a detailed analysis of a large amount of information about individual settlements, Similar information is not available for settlements covering groups of non-manual employees, It l.s assumed that the same settlement index is appropriate for these employees, but the weights are defined in terrr:s of the broad relationships underlying the construction of weights for manual e1~loyees, described by a single factor, namely the average time between settlements for non-manual employees. * EP,R No.2, Chapter 2. - 46 -'·. ; .. ·Thefnctora which enter into the weights (RWSA) describe the aggregate . .~ I. :frequency of settl~ments 1 and .depend on the rate of inflation, but also on·~, ·other factors influencing the process of wage bargaining, such as incomes \ '\, \ policies. Thus, in the future, the aggregate- frequency of settlements (described by Rl>IS ·arid L.WS) are made conditional on the assumed nature of incomes policies · .·The level of money wage settlements {s assumed to be set, under condition! ·of free collective bargaining, by attempt~ to achieve a particular real .. disposabl.e wage at the settlement date, allowing for the lag between the date of settlement and the date·Qf implementation of wage awards. The operation of incomes· policies is assumed to determine the level. of money wages at settlement, with the real value of the wage bargain under these circumstances emerging as a consequence of inflation and. fiscal drag*. The feasibility of incomes policies can then be assessed on the basis of their consequences for real post-tax wages. ., Gross income from employment is derived from standard '"eekly earnings and level of employment, together with an adjustment for cyclical variatiops in earnings associated with changes in hours worked and other premium paymznts. ·~ * *This may be achieved by treating money wages at settlement 0{S ') as a target and the real value of the bargain (}ID**) as an instrument · - 47 -- - !g,uadons [fo.68~.1 1n lltJK*· · tr + 1n 1[(1·RIISA) ws"· + RIISA.IIS*~- ] + RNMM.0.32 .JJ J·[~~N "O,v .liS*' + (1,5 · L~SN) ws*· + WCLA*· 1 ~..,6 ln NH 6.2 WS*' .., wo** 0.75PC" + 0.25PC"-l . l - O. 75TW - O. 25TW_ 1,~ 6.3 PC" D C" I c 6.4 % PC" 6.s· TW 6.6 RWSA · PC"/PC"-1 - 1 a TTW'/(CGS' + WBUK') ~WSe .RL'WS + RWS (1 - LWST) - RLWS - ! + LWSTJ 6.7 RWS "" tr + 3,0 %PC" "' 6.8 RLWS ~ tr + LWST_1 - 0,35 RWS_1 6.9 LWS 6.10 HBUK' r= tr ... 2.25 % PC" - 0,25 RWS_l ·-* QUK ]0.4 . G ~~·~. t LEUK~ c (1. 3) Consumers' e~~enditure (£1970m) C" (1,1) Consumers' expenditure (£m) l,- CGS' (3.4) Income· ·from employment in public services (£m) - *. EP (ex) Trend labour productivity (£1970 th) EUK (5 .1) Employment in m< business sector (th, male full-time equivalents) UJS (6.9) Average time since last settlement for.groups of·manua1 workers having a settlement in the current year (years) LHSN (ex) Averaee time since last settlement for groups of nonmanual workers having a settlement in the current year (years) LWST (ex) Average date of settlement within the year for manual workers (measured as time to the end of the current year (years) (ex) Normal·weekly hours worked by male manual employees in all industries and services, excluding public sector (index, 1956=1) Pen (6. 3) Price of consumers' expenditure· (defl) - 48 - - %PC" (6, 4) Inflation of consumer prices (ratio) QW~ (9.1) Business sector output (£1970m) R1~1M (ex) Ratio of non-manual to manual average earnings RLHS (6.8) Average time since the last settlement for those manual ltJOrkers not· settling in the current year (measured to the middle of the year) (years) RwS (6.7) Proportion of manual 'workers covered by settlements made in the current year (including more than one settlement where appropriate) (r~tio) RWSA (6. 6) The 't-reights given to settlements for manual workers in the previous year (ratio) TTW' (3.9) Direct taxes and national insurance contributions on .income from employment (£.m) Tti (6.5) Effective direct tax rate on income from employment (ratio) iVBUK' (6 .10) Income from en1ployment in UK business sector (fm) *}.JCJ...A '(ex) Average annual unconsolidated cost-of-living and threshold payments per male full-time employee (f. th per annun < ' Real value of "tmge bargain (£.1970 th per annum) *HS 1 (6. 2) *';·JUI{ I (6 .1) Level. cf money earnings at settlements (£.th.per annum) '\ Star1dard v7eekly money earnings per male full-time employee in UK business Becto:.:: (£th per annum) 7. Prices - 49 - - The basic price variab~e used in the model is the pri~e of business sector domestic sales at full cost (PUK'). This is defined as the ratio of consumers' expenditure plus public current expenditure (excluding public services) plus public and private fixed investment (excluding the North Sea), all m~asured at current full cost, to. the sum of the equivalent items measured at co~staut factor cost. Movements in this average price thus reflect ..· movem<2nts in taxes on business sector inputs - ratesp protective import dutie:ll ) ·less subsidies to pubiic corporations - as well as in costs of domestic factof· inputs and in import prices then1selves. Average market prices of the various components of .domestic sales· are derived where necessary by applying the appropriate sales tax rate to the full cost price. The original volume series at factor cost which are used to generate the average full cost price for past ye<.rn;, and '1-Yhich embody different implied full cost prices, are replaced in the model by series ~1hich are inclusive of the relative price effect, i.e. uhich share the sa:ne full cost.price · .The price of domestic sales is assu1u~d to be dete1·111ined on a cost-plus bads in a forr:1 which r;eneralises the Normal Price Hypothesis * about price forreation in ~~nufacturing to the econo~; as a whole. Thus prices are set as c:. z:.:;,:~::."·up on historic nor::ual unit costs, v:h:o:rc historic costs are sl a lasg·~d ft·.ncd.on of current costs, wi~h an average l[!g of about one quartc · CUJ..·rent c8:.otz o:re c~p1·e:::sed as a T11eighted average of a,n ind~x of .domestic costs pet" ur.~lt of normal business output and an index of import costs per unit oi imports, with the '"eights being actual business output and actual imports res?2Ctively. God:i.cy c.nr:! No:rdhaus, Econorl!ic Jounu'.l, September 1972, and Coutts~ Godley and Nordhaus, 'Industrial Pricing -in--til-e UKt, fo·i~thco::.,.ing 1 Di\E mono(j:r3.ph\ - -.so- DomeGdc coatt'l ·comprise labou;r costs per unit of normal output, expressed ; as at&n.dard motM'i'1 Q~mi~:zs per 'm&le full·~im,a: employee divided by trend rates.· · >I · productivity, to~<leh(i,lr w:!th ,. . 0 :.· · ... fat:m profits~ private rents, less subsidies Rates and r_..' subsidies to public c.orporadon.s &re those indirect taxes which are·treated as le¥l(lld on do~sde primacy inputs;.' fQm profits are included to take account ·of the f~c.t tha.t· pricem. of dom3dc agricultural .products are not set on .a eo~t-plu:! b&iai8~ but ·&~e· l~rg"l1 dQt®~n~d by EEC.po1l~~es, so ·that do~stic Private are prajee:ted to ~V@ partly in line with inflatio~. All do~etic costs '· ' Bypoth{;$h 9 nr-~ly that gh"mil l!iet prices in relation to normal, rather than }: fr<r~ th~ .!:'Jo'i:'th Se.n t @z~o'&'ts of fuels fron1 the North Sea e.re excluded as not .. 20%. ..:.· --------------=~.--------Fitted to the period 1962-74. ..... . - 51 - Equations 7.1 ln PUK' · tr + 1n HC* 7.2 RC* 7.3 cc* [ .D 0.7 CC* + 0.3 CC*_1 · DC DC*1970 QUK + 'MMCC*'* 1970 JMXUK I (QUK + MXUK) 7.4 -MXUK · MUK + XNS - XP' ··"':· 7.5 DC* ~ WUK*' TTRTS' - TSPG' + PRAG' + TRNTS' EP* + QUK*· 7.6 MC* MUK" + XNS" .. 0.8.XF.PXF' ·D MXUK TMA~7.7 ln PRAG' · tr + 0.8 ln f!MA' (1 + 7.8 ln TRNTS' · tr + 0.6 ln PUK' 7.9 %PUK' :: PUK' /PUK' -l -1 '-''· CC* (7.3) Current full cost per unit of sales (deft) DC* (7.5) ·D' om. estic costs per unit of output (defl) (ex). Trend "'labour productivity (£1970th) - (d~iLHC* (7~2) Historic full cost per unit of sales MC* (7.6) Import costs per unit of imports (defl) MUK (2.11) Total imports of goods and services to UK business sector (q970m) MUK" (2~23) Total imports of goods and services to UK business sector (£m) MXUK (7.4) Business sector purchases from North Se~ and abroad, less exports of fuels (£1970m) · PMA' (2 .14) Price of. imports of food, drink and tobacco (defl) PRAG' (7. 7) Incoma from self-employment and other trading income in agriculture, forestry and fis_hing (£m) - PUK' (7 .1) Price of business sector domestic sales (defl) %PUK' PXF' (7. 9) Inflation of price of business sales (ratio) (2.19) Price of exports of fuels (de£1) QUK (9 .1) Business sector output (£1970m) · - 52 - QUI<* (ex) Trend value of business sector output (£1970m) TMA (ex) Effective rate of protective duty on imports of food, drink and tob·cco (ratio) TRNTS' (7.8) Private rents (£m) ' ·-' TSPG' (3.20) Subsidies to publi~ corporations (£m) -TTRTS' (3.19) Local authority rates (£m) . WUK*' (6.1) . Standard average earnings in business sector (£th per annt XF (ex) Exportsof fuels (£1970m) XNS (ex) North Sea sales of fuels to UK (£1970m) XNS" (4.i 3) · North Sea sales of fuels to UK (£m) ... -· 53 - 8·. ·· Stoekbu:Uding and stoek appreciation Total stoekbuilding :f.n volume terms is expressed in the form of a conventional \ eyelieal adjustme. nt relationship to eurrent and lagged ehanges : in real output, The·constant and trend terms eurtently used in the equation imply a slow downward trend in the stock-output ratio, r· The. average price .of additions to stocks moves in line with the historic cost of sales, and this rel~tionship is used to . generate stockbuilding at current prices · . Private and public s~etor stockbuilding at current prices are required to complete the private and public sector income-expenditure accounts; private· stoekbuilding is obtained as approximately 92% of the total, and publie stockbuilding as a residual. Stock appreciation in the private and public sectors is in each case obtained from the difference bet~Teen business sector final sales meas~- at eurrent and historic full cost. - El:J.uaticns 8.1 s = tr +0.35 (QUK - QUK_1) + 0.2 (QUK_ 1 - QUK_2) 8.2 S' · · tr + S.HC* ~ 8.3 SP' = tr + 0.92 S' I .i 8.4 SAP'. = tr + O. 92 (CC* - RC*) (QUK + XNS + HUK) I~ i 8.5 SAG' · tr + 0,08 (CC*- HC*)(QUK + XNS + MUK) CC* (7. 3) Current full cost per unit of sales (defl) HC)'t (7..2) Historic full cost per unit of sales (de£1) ~ MUK (2. 11) Total imports of goods and services to UK business sector (£1970m) QU'K (9 ,1) Busineos sector output (f.1970m) ·s (8.1) Stockbuild ing (£1970m) SAG' (8.5) ·Public sector stoc~ appreciation (Em) SAP' (a. 4) Private sector stock appreciation (£m) -·54 - SP' (8.3) Private sector stockbuilding (£m) S' (8,2) Stockbuilding (£m) . :· XNS (ex) North Sea sales of fu~ls to UK (£1970m) .,-. - 9. GDP identities - 55 - The first two of these, QUK and QUK' , determine business sector output at constant and current factor cost respectively. The output of the North Sea and public services is added to business sector output to obtain gross domestic product (compromise) on the conventional Blue Book definition, i.e., Q * Equations 9.1 QUK C + CGP + IPUK + IG INSG + MVNSUK + MMNSUK + X + S - XNS - MUK 9.2 QUK' (C + CGP + IPUK + IG- INSG).PUK' + (MVNSUK" + MMNSUK")/ (1 + TI) + X' + S' - XNS" - MUK" - TTRTS' + TSPG' 9.3 Q QNS + CGS + QUK 9.4 PDX" [ (1 + TMM)MMNSF' + MMNSUK" + IPUK" + C" + S' + CGS" + CGP" + IG" - INSG"] / (IPUK + MMNSUK + MMNSF + C + S + CGS + CGP + IG - INSG) c (1.3) Consumers' expenditure (£1970m) C" (1.1) Consumers' expenditure (£m) CGP (ex) Public current expenditure other than public services (£1970m) CGP" (3. 6) Public current expenditure other than public services, (£m) CGS (3. 2) Public serv~ces expenditure (£1970m) V CGS" (3.4) Public services expenditure (£rr) IG (ex) Public fixed investment (£1970m) IG" (3. 7) Public fixed investment (£m) INSG (ex) BNOC direct investment in North Sea (£1970m) INSG" (4.13) BNOC direct investment in North Sea (£m) IPUK (1. 6) Private fixed investment, excluding North Sea (£1970m) IPUK" (1. 4) Private fixed investment, excluding North Sea (£m) * The residual error between compromise and expenditure estimates of GDP is allocated to private stockbuilding (SP') and the error between compromise and income estimates to private trading income (PRUK') · - 56 - MMNSF (ex) North Sea imports of capital equipment from abroad (£1970m) MMNSF' (4.7) North Sea imports of capital equipment from abroad (£m) MMNSUK (ex) North Sea imports of capital equipment from UK (£1970m) MMNSUK" (4.6) North Sea imports of capital equipment from UK (£m) ML~ (2.11) Total imports of goods and services to UK business sector (£1970m) .,_ }PJK" (2.23) Total imports of goods and serv~ces to UK business sector (£m) MVNSUK (ex) North Sea imports of serv1ces from UK (£1970m) MVNSUK" (4.4) North Sea imports of services from UK (£m) PDX" (9.4) Price of domestic expenditure (defl) PUK' (7.1) Price of business sector domestic sales (defl) Q (9.3) Gross domestic product, compromise estimate (£1970m) QNS (4.1) Gross domestic product of the North Sea (£1970m) QUK (9.1) Gross domestic product of UK business sector (£1970m) QUK' (9.2) Gross domestic product of UK business sector (£m at factor cost) S (8.1) Stockbuilding (£1970m) S' (8.2) Stqckbuilding (£m) TI (ex) Effective rate of sales tax on UK investment and sales to North Sea (ratio) TMM (ex) Effective rate of protective duty on imports of finished manufactures (ratio) TSPG' (3.20) Subsidies to public corporations (£m) TTRTS' (3.19) Local authority rates (£m) X (2.4) Exports of goods and services (£1970m) X' (2.21) Exports of goods and services (Em) XNS (ex) North Sea sales of fuels to UK (£1970m) XNS" (4. 3) No.rth Sea sales of fuels to UK (£m) - 57 - 10. Money supply and DCE The model now explicitly contains the links between the finance of the PSBR, interest rates and the principal monetary aggregates. The short-run interest rate (Minimum Lending Rate, see also section 3) is related to the level of world interest rates and the rate of domestic inflation. Except for the influence of credit restrictions such as the "corset", the money stock is assumed to be demand-determined in relation to short-term interest rates, the rate of inflation and the level of private disposable income. The positive interest-elasticity for both nominal and real interest-rate changes, represents an own-rate effect for interest-bearing bank deposits when MLR rises, bank deposit rates rise also, thus making bank deposits more attractive, cet.par., than long-term assets or other short-term deposits. Given the finance for the PSBR which is provided by reserve changes (BOF' - see section 2) and by the banking system, sales of public sector debt are determined by the financing identity for the PSBR, and the level of long-term interest rates by the yield differential required to achieve such sales, allowing for the, income elasticity of demand for securities. Domestic Credit Expansion is split into two components : the change in M3 less the 'basic' balance of payments, and 'other credit sources', which is absorbed into the constant and residual. Equations 10.1 10.2 10.3 10.4 10.5 RI = tr + 0.33 RIF + 0.67(PUK 1 /PUK 1 -1 - 1) ln H3 1 = tr + 0. 2 ln (1 + RI) - 0 ·14 . PUK I /PUK I -1 + ln (YRI + YWI + YH') 0!.025 QRB KPG 1 - BG 1 + BOF' - RKBG. (M3' - M3 I -1 ) RI25 = tr + RI + [o.SKPG' - O.OS(Yi-J 1 -1+ YHI -1 + YR' _1)] YW 1 + YH' + YR 1 DCE' "" tr + M3 1 - M3 1 -1 - BB' - 58 - BB' (2.35) Basic balance of payments (£m) BG' BOF' (3. 24) Public sector borrowing requirement (£m) ~.38) Balance for official financing (£m) DCE' (10.5) Domestic Credit Expansion, pre-December 1976 official definition (£m) ·.. KPG' (10.3) Sales of public sector debt to private sector and .· overseas (£m) M3' (10.2) End-year money supply, H3 definition (£m) PUK' (7.1) Price of business sector domestic sales (defl) QRB (ex) Degree of credit restriction (0 = no restrictions, 2.5 = severe restrictions) RI (10.1) Minimum lending rate (previo~sly bank rate), average for the year RIF (ex) Eurodollar interest rate, average for the year RI25 (10.4) Yield on Har Loan, average for the year RKBG (ex) Bank lending to the public sector in sterling, plus increased currency in circulation, as a proportion of the change in the money supply (ratio) YH' (1. 8) Disposable household grants (£m) YR' (1. 9) Disposable property income (£m) YH' (1. 7) Disposable income from employment (£m) - 59 - Appendix I Constant and trend coefficients fitted in equations on data for 1962-74(a) as at March 1st 1977 Equation Number Dependent variable 1. Private expenditure 1.1 ln C" . 1.4 ln IPUK" · 2. Balance of payments 2.1 ln XX 2.5 MF 2.6 HB 2.7 1n HS 2.8 1n e 2.13 ln PXX' 2.14 1n PHA' 2.15 ln Pl-'m' 2.16 1n PMS' 2.17 ln PMM' 2.18 ln PM-v' 2.19 1n PXF' 2.26 1n PUKF' 2.27 1n PFUK' 2.28 NF' 2.32 (s) 1n KFUK' 2.33 (s) KUKF' 2.37 (s) IG>JR' 3. Public sector 3.10 ~ 3.16 3.17 3.19 3.20 3.21 3.22 3.23 1n nn ln GRF' 1n CRRC' ~' 1n TTRTS' 1n TSPG' 1n TPPG' NG' 1n NGC' Estimated coefficients Constant Trend 0.010 -0.012 o.o 0.0 9.481 -404.701 1207.554 -3.289 -22.165 0.017 0.083 0.104 0.047 0,092 -0.176 0.033 -2.991 8.631 115.330 -0.273 922.720 1732.315 -0.007 18.935 3.750 0.051 0.022 -0.003 -0.003 -0.012 -0.009 -0.006 0.008 -0.0003 0.039 -0.123 -2.741 0.0 -86.680 o.o -2.885 5.122 4.628 6. 728 14.857 -2.834 -68.406 5,210 0.077 0.013 0.113 0.026 0.117 0.009 25.910 o.oss - - 60 - Equation Nt:mber Dependent variable Estimated coefficients Constant Trend 4. North Sea 4.2 (s) ln PNSG" 4.4 (s) ln MWlSUK" 4.5 (s) ln MWlSF" 4.6 (s) ln MMNSUK" 4.7 (s) "' ln t-1MNSF' .· 5 ·. Employment 5..1 ln EUK 5.2 ln RE 0.624 0.172 0.092 0.121 0.232 -0.224 -0.412 -0.048 0.0 o.o 0.0 o.o -0.015 0.003 6. Earnings 6.1 6.7 6.8 ~· 6.9 ln WUK*' RWS RLWS UJS -0.429 o. 702 0.702 1.605 0.022 -0.003 -0.015 -0.005 7. Prices 7.1 7.7 7.8 ln PUK' ln PRAG' ln TRNTS' 0.077 6.467 6. 719 8. Stockbui1ding and stock appreciation 8.1 s -167.681 \. 8.2 s' 22.777 8.3 , 8.4 SP' SAP' -11.348 -432.495 8.5 SAG' -1.096 10. Money supply and DCE 10.1 RI 10.2 ln M3' 10.4 RI25 10.5 DCE' 0.006 -0.661 0.049 147.000 0.001 0.036 0 .081 0.0 o.o o.o 71.242 -1.981 0.0 o.o 0.0 o.o (a) (s) after an equation number indicates exceptions to this rule, where coefficients were fitted over the period 1970-74. - Appendix II - 61 - Name Reference Reference no. no. in in model manual program 7\.ANSF 1 ex 191 Foreign oil companies' depreciation allowances (£1970m) ;:jARD 1 -;j 3 ex 144 Value of capital allowances (£m) BI 2. 31 104 Current balance of payments (£m) BB 2.36 186 Basic balance in foreign currency units (millions) BB' 2.35 105 Basic balance of payments (£m) BG' 3.24 162 Public sector borrowing requirement (£~) BOF' 2.38 195 Balance for official financing (£m) BT' 2.25 103 Balance of trade in goods and services (£m) c 1.3 48 Consumers' expenditure (£1970m) C' 1.2 43 Consumers' expenditure (£m at full cost) C" 1.1 41 Consumers' expenditure (£m at market prices) CC* I CGP ~l ' 7.3 3 ex 64 Curren~ normal unit costs (defl) 51 Public current expenditure other than public services (£1970m) CGP" 3.6 170 Public current expenditure other than public services (£m) CGS '. CGS' 3.2 3.4 1 Public services expenditure (£1970m) 2 Public services expenditure (£m at full cost) CGS" 3.5 3 Public services expenditure (£m at market prices) DCE' 10.5 197 Domestic Credit Expansion (£m) DC* 7.5 f./ ! ' DTWl : ..~/- ~ 3 ex 65 Domestic normal unit costs (defl) -· 27 Discretionary tax allowances (£th) EE 5.3 129 Employees in employment (th. persons) EESE ~..('~r /~ 5 ex 132 Self-employed (th. persons) EGS 3.1 5 Public service employment (th. male full-time earnings equivalents) - EGS* ~) 3 ex .P~~ 3 ex EP* (~.c.~) 7 ex EUK 5.1 ., GD' .· GR 3.27 3.15 GRF' 3.16 GRH' 3.14 GRRC' 3.17 GRRI HC* 7.2 / IG" 3.7 / INSG " ' / - 4 e" INSG"' 4. 13 IP1JK 1.6 IPUK' 1.5 IPUK" 1.4 IRCH 2.3 KFUK' 2.32 KGF' ~.J._ ; 2 ex KGNS -.t-~.yv./.,..l.. / KGP \_z/~_-..; 3 ex 3 ex - 62 - 183 Exogenous component of public service employment (th. male full-time earnings equivalents) 153 Recipients of household grants (th. pensionerequivalents) 66 Trend labour productivity (£1970th) 128 Employment in business sector (th. male full-time earnings equivalents) 176 Total end-year public sector debt (£m) 152 Average pension (£th per annum) 38 Current government transfers abroad (£m) 151 Household grants (£m) 135 Other current grants to private sector (£m) 136 Capital grants to private sector (£1970m) 67 Historic normal unit costs (defl) 167 Net increase ~n consumer hire purchase debt (£m) 52 Public fixed investment (£1970m) 172 Public fixed investment (£m) 18 BNOC direct investment ~n North Sea (£1970m) 20 BNOC direct investment ~n North Sea (£m) 50 Private fixed investment, excluding North Sea (£1970m) 49 Private fixed investment, excluding North Sea (Em at full cost) 42 Private fixed investment, excluding North Sea (Em at market prices) 189 Export cost competitiveness (ratio) 112 Long-term net private capital inflm.rs to North Sea (£1970m) 1:06 Long-term private capital inflows to business sector (£m) 108 Net official long-term capital inflows (£m) 25 BNOC lending to N. 3ea operators (£1970m) 163 Other net lending to private sector (£1970m) KPG' 10.3 KTRC' 2.34 KUKF'. 2.33 KUKNs_JLL 1 ex KWR' 2.37 . L Q'-:.;:s)j~,_;.. 5 ex i LWS 6.9 LWSN Rbfp 6 ex jr..J M 2.12 M' 2.24 MAC' ( '/ ) 2 ex MB 2.6 MC* MCON ( 7.6 \2 ex _/ MF 2.5 MMNSF' 4.7 fMJ. MMNSUK / 4 ex MMNSUK" 4.6 2.8 - 63 - 198 Sales of public sector debt to private sector and overseas (£m) 109 IncreaAP. in net trade credit outstanding (£m) 107 Long-term private capital outflows (£m) 190 UK private equity finance of North Sea investment (£1970m) 194 Net short-term capital inflows (£m) 133 Labour force (th. persons) 123 Average time since last settlement for groups of manual workers having a settlement in the current year (years) 142 Average time since last settlement for groups of non-manual workers having a settlement . in the current year (years) 141 Average date of settlement within the year for manual workers, measured as time to the end of the current year (years) 54 Total imports of goods and services (£1970m) lOO Total imports of goods and services (£m) 90 Imports of food, drink and tobacco (£1970m) 96 Imports of US military aircraft (£1970m) 99 Imports of US military aircraft (£m) 92 Imports of basic materials (£1970m) 187 Import costs per unit of imports (defl) 184 Degree of import restriction on finished manufactures (= 1 with no restrictions)(ratio) 91 Imports of fuels (£1970m) 15 North Sea imports of capital equipment from abroad (£1970m) 24 North Sea imports of capital equipment from abroad (£m) 14 North Sea imports of capital equipment from UK (£1970m) 19 North Sea imports of capital equipment from UK (£m) 94 Imports of finished manufactures to business sector (£1970m) - MS 2.7 MUK 2.11 MUK" 2. 23 I MVNSF ~~ 4 ex MVNSF" 4.5 -r~.t-/ ", MVNSUK J 4 ex MVNSUK" , 4. 4 HVUK \,-n7-~.-~··4..2 ex MXUK M3' NF' 7.4 10.2 2.28 NG' 3.22 NGC' 3.23 NH 6 ex NR' 1.11 PAF' PC" 6.3 . %PC" 6.4 PDX" 9. 4 f.{~l PFF' / 2 ex PFUK' 2.27 PMA' PMB' PMF' PMM' 2.14 2.15 2.20 2.17 - 64 - 93 Imports of semi-finished manufactures (£1970m) 97 Total imports of goods and services to business sector (£1970m) 98 Total imports of goods and services to business sector, including protective duties (fm) 13 N. Sea imports of services from abroad (£1970m) 23 N~ Sea imports of services from abroad (fm) 12 N. Sea imports of services from UK (£1970m) 17 N. Sea imports of services from UK (£m) 95 Imports of 'other items' (mainly services) to business sector (£1970m) 4 Business sector purchases from N. Sea and abroad, less exports of fuels (£1970m) 196 End-year money supply (£m) 35 Public sector net payments of interest and dividends abroad (£m) 161 Public sector net payments of interest and dividends (£m) 164 Public sector receipts of interest and dividends (£m) 181 Normal weekly hours (index, 1956=1) 134 Private sector net receipts of interest and dividends from public sector (£m) 82 World price of food and materials in foreign currency (index) 173 Price of consumers' expenditure (defl) 127 Inflation of consumer prices (ratio) 185 Price of domestic expenditure (defl) 83 World price of fuels ~n foreign currency (index) 34 Private property income and transfers received from abroad (£m) 69 Price of imports of food, drink and tobacco (defl) 71 Price of imports of basic materials (defl) 70 Price of imports of fuels (defl) 73 Price of imports of finished manufactures (defl) - - 65 - PMS' 2.16 72 Price of imports of semi-finished m1nufactures to business sector (defl) PMV' 2.18 PNS p~.....l. 4 ex / I PNSF' 4.12 74 Price of imports of 'services' to business sector (defl) 32 Effective rate of Corporation Tax a~d Petroleum Revenue Tax on N. Sea profits (ratio) 30 N. Sea profits paid abroad, after tax (£m) PNSG" 4. 2 193 Price of N. Sea gas (defl) .. Pot..i PNSO . / 4 ex 11 Price of N. Sea oil relative to price of imported fuels (ratio) ,PNSUK' 4.11 29 N. Sea profits paid to UK, after tax (£m) PRAG' 7.7 117 Farm profits (£m) PRUK' 1.10 115 Business sector private trading profits and rent (£m) PUK' 7.1 63 Price of business sector domestic sales (defl) %PUK.' 7.9 102 Inflation of price of business sales (ratio) ·' PUKF' 2.26 '(~!,.·. P"-TF' / 2 ex 33 Private property income and transfers paid abroad from business sector, before tax (£m) 81 World price of exports of manufactures in foreign currency (index) PXF' 2.19 84 Price of exports of fuels (defl) PXX' 2.13 68 Price of non-fuel exports of goods and services (defl) Q 9.13 159 Gross domestic product, compromise estimate (£1970m) QNS 4.1 16 Gross domestic product of the N. Sea (£1970m) QNS' 22 Gross domestic product of the N. Sea (Em) QRB 26 Degree of credit restriction (0 = no restrictions, 2.5 = severe restrictions) QUK. QUK' 9.1 9.2 53 Gross domestic product of business sector (£1970m) 60 Gross domestic product of business sector (£m at factor cost) QUK* \,__ ) 7 ex 188 Trend value of business sector output (£1970m) QUKK 2.39 158 Business output capacity (£1970m) RCH 2.2 RCM 2.10 RCS 2.9 RE 5.2 ./: ,/ RHW i -e-..,'4<-\ 3 ex /...) / / ... RI 10.1 ·' RIF .D /1 rttr\~ 10 ex . RI25 10.4 !l RKBG f"'-.fA 10 ex / tf-tRKTM 2 ex RKTX f<v-L 2 ex RLWS 6.8 6 exllli,NH (' .,.<P/cJo,t,.":c' ~,~· " ...--· RU ~~·"-'\ ,.., 3 ex ~ t<t-·-~.:-"" RI.J'GSUK - 3 ex .. R\-TS 6.7 RHSA 6.6 RIH --k~;..v-, _:' 3 ex .Rl-12 ...~.£(.,\':l~'~ 3 ex ; ,_ )R.X ( \_ 2 ex - 66 - 89 Lagged export cost competitiveness (ratio) 174 Lagged price competitiveness for imports of finished manufactures (ratio) 182 Lagged price competitiveness for imports of semi-finished manufactures (ratio) 130 Relativity between numbers of persons and male full-time earnings equivalents (ratio) 155 Relativity between pensions and average earnings (ratio) 37 Bank rate/MLR, average for the year 177 Eurodollar interest rate, average for the year 199 Yield on War Loan, average for the year 200 Bank lending to the public sector in sterling, plus increased currency in circulation, as a proportion of the change in the money supply (ratio) 111 Import trade credit coefficient (ratio) 110 Export trade credit coefficient (ratio) 122 Average time since last settlement for those manual workers not settling in the current year, measured to the middle of the year (years) 143 Relativity bet\veen non-manual and manual average earnings (ratio) 154 Relativity betvreen average unemployment benefit and average pension (ratio) 8 Relativity betHeen public service and business sector average earnings (ratio) 124 Proportion of manual workers covered by settlements made in the current year (ratio) 121 I.Jeight given to settlements for manual workers in the previous year (ratio) 139 Effective rate of initial investment allowances (ratio) 140 Proportion of private sector stock appreciation subject to tax (ratio) 86 Effective exchange rate, in weighted average foreign currency per unit sterling (index) - - s S' SAG' SAP' SBBW' 8.1 8.2 8.5 ) 8.4 2.29 55 62· 179 116 36 SET' 5 ex() 178 ·· ·' SG' 3.8 168 ~SNSUK 4 ex 31 SP' 8.3 SRI 3.26 TCGP ""(""A"~ ;" ..) 3 ex TCl _.t---j(C"v-\ 3 ex I c/ TC2 --('~,, 3 ex ! (,. TF ~......C·i-.."', 3 ex "/- .,! TGS C1._.. ~.t-:: i3 ex 166 175 171 45 46 39 6 TI .-·r-UN\ 3 ex l"" ./ TMA '""P. ~·\IV'", 3 ex / TMB ~r-_1\, 3 ex t TMM -{<2-~~'J 3 ex 157 57 165 76 '"'7' 8 77 80 79 Stockbuilding (£1970m) Stockbuilding (£m) Public sector stock appreciation (£m) Private sector stock appreciation (£m) Accumulated basic balance in foreign currency (millions) Rates of Selective Employment Tax (index) Public sector stockbuilding (£m) Share of post-tax N. Sea profits paid to UK (ratio) Private sector stockbuilding Average rate of interest on debt not turned over within one year Effective rate of sales taxes on public current expenditure excluding public services (ratio) Effective rate of sales tax on income-elastic consumption goods (ratio) Yield of other sales taxes on consumption (£1970m) Effective rate of tax on private property ~nccme and transfers paid abroad (ratio) Effective rate of indirect tax on public services expenditure (ratio) Effective rate of direct tax on household grants (ratio) Effective rate of sales tax on UK investment and sales to N. Sea (ratio) Revenue from capital taxes (£1970m) Effective rate of protective duty on imports of food, drink and tobacco (ratio) Effective rate of protective duty on imports of basic materials (ratio) Effective rate of protective duty on imports of fuels (ratio) Effective rate of protective duty on imports of finished manufactures (ratio) Effective rate of protective duty on imports of semi-finished manufactures (ratio) TPNS' 4.10 TPPG' 3.21 TR.J.~S' 4.8 TRNTS' 7.8 T RR _\.~+f_', lv_), 3 ex «. · .. TSC'-;-~-\~1.'·"\ 3 ex ~J TSPG' 3.20 TTC' 3.18 TTfi' 3.11 TTR' 3.12 TTRTS' 3.19 TTW' 3.9 TW '·· TIH 6.5 3.10 TT..J2 / i:;>-f~ 3 ex ..; TX ~./~.,_., ...... 3 ex u 5.4 \~TBUK' 6.10 WCLA*' ~~f 6 ex t;; WD** ~{6 ex "'w"F tn'oM\' . 2 ex ; ' HGS' 3.3 ~-lS* I 6.2 wUK*' 6.1 - 68 - .. 28 Revenue from Corporation Tax and Petroleum Revenue Tax levied on N. Sea profits (£m) 113 Gross trading surpluses of public enterprises and public sector rent (£m) 21 Revenue from N. Sea royalties (£m) 118 Private sector rents (£m) 145 Effective rate of direct tax on property income (ratio) 47 Subsidies on consumers' expenditure (ratio) 59 Subsidies to public corporations (Em) 44 Net sales taxes on consumers' expenditure (£m) 156 Direct tax on household grants (£m) 138 Direct tax on property income (£m) 58 Local authority rates (£m) 147 Direct tax on income from employment (£m) 180 Effective rate of direct tax on income from employment (ratio) 148 Average tax value of income tax allowances (£th) '149 Effective marginal direct tax rate on income from employment (ratio) 75 Effective rate of sales tax on exports (ratio) 131 Numbers unemployed (th.) 114 Income from employment in business sector (£m) 120 Average value of cost-of-living and threshold supplements (£th per annum) 126 Real value of Hage bargain (£1970th per annum) 85 Volume of >vorld trade in goods and services (index) 7 Average earnings in public services per male full-time equivalent (£th per annum) 125 Level of money earnings at settlement (£th per annum) 119 Standard money weekly earnings in business sector per male full-time equivalent (£th per annum) - X 2.4 X' 2.21 X" 2.22 XF RJf:o/s:,.i 2 ex 'cJ ~f\:XNS 4 ex .. XNS" 4.3 < « XNSG G\ ~r..~, .../~·.., 4 ex / !· XX «' 2.1 YF' YG' YH' YR' YRT' ~ Y\.J' \\ ~) 2.30 3.25 1.8 1.9 3.13 1.7 - 69 - 56 Exports of goods and services (£1970m) 61 Exports of goods and services (Em at full cos,t) 101 Exports of goods and services (fm at market prices) 87 Exports of fuels (£1970m) 9 N. Sea sales of fuels (£1970m) 10 N. Sea sales of fuels (Em) 192 N. Sea sales of gas (£1970m) 88 Exports of goods and services, excluding fuels (£1970m) 40 Overseas sector disposable income (Em) 160 Public sector disposable ~ncome (Em) 169 Disposable household grants (fro) 146 Disposable property incce2 (Em) 137 Taxable property inccm2 (£c) 150 Dispos,'C'.ble ~ncose f.r:om ec-ploy22nt (£m) -  Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Title A name given to the resource Technical Manual on the CEPG Model 2nd Edition Creator An entity primarily responsible for making the resource M J Fetherston Source A related resource from which the described resource is derived Technical Manual on the CEPG Model 2nd Edition, May 1977 Date A point or period of time associated with an event in the lifecycle of the resource May 1977