^{Note (1) page 4} House of Commons Debates, 30 March 1971, col. 1368 and Financial Statement 1971-72.

^{Note (2) page 4} National Institute Economic Review no. 56, May 1971, page 14.

^{Note (3) page 4} A revision of view of this kind was already incorporated in the National Institute's May forecast. See pages 7-9 below for a more detailed comparison of alternative fore casts and out-turn.

^{Note (4) page 4} The output growth forecast of the Financial Statement seems in fact to have been technically quite good (cf. pages 7-9 below), though the error was one of over-optimism.

^{Note (5) page 4} See National Institute Economic Review no. 55, February 1971, page 6.

^{Note (1) page 5} The definition of a passive policy implied here is a rate of growth of money supply equal to the sum of the steady employment growth rate plus the going rate of inflation.

^{Note (2) page 5} Figures are available for money supply up to the end of the third quarter of last year. The rates of growth shown in the chart are centred at the end of the quarter, so the observations expire at the end of the second quarter.

^{Note (1) page 6} See chart 5, page 17.

^{Note (2) page 6} The national accounts figures on which this and sub sequent sections are based are those set out in table 1 on page 23; figures for the fourth quarter of 1971 are partly estimated.

^{Note (1) page 7} National Institute Economic Review no. 55, February 1971, pages 7-8.

^{Note (2) page 7} Effects on stockbuilding, which are assumed to be relatively small, are incorporated in the total estimated effects of the policy changes on GDP, but are not separately shown.

^{Note (1) page 8} The original estimate was thought of as pertaining to hire purchase debt alone, and to amount to increases of £25 million in the ‘credit effect’ (weighted change in consumer debt) in each of the last two quarters of 1971. (See National Institute Economic Review no. 57, August 1971, page 7 and page 10, table 5.) In fact, the total ‘credit effect’—including bank advances—was as large as £150 million in the third quarter of 1971 and £180 million in the fourth (see page 27, table 4). An assumption that in the absence of the relaxations the credit effect would have run at the average level of the first half-year implies policy-induced increases of £100 million and £130 million, respectively, in the third and fourth quarters, and these were the figures used to generate the upper estimate of the policy effects. They implicitly take account of the change in bank advances in the second half of the year, as well as the change in hire purchase debt outstanding which all that the original estimates referred to.

^{Note (2) page 8} National Institute Economic Review no. 55, February 1971, page 8, table 3. Subsequent data revisions diminish this assessed error slightly to about 1.6 per cent. For the com parison between second half-years, the forecast error this year seems to have been negligible on the figures shown in table 3 whereas, last year, the error reported for the comparable period was about 1.8 per cent (see Financial Statement 1971-72, page 8, table 1).

^{Note (1) page 9} House of Commons Debates, 20 July 1971, cols. 1263-4.

^{Note (2) page 9} The Financial Statement forecast looked for a decline of ½ per cent between these two half-years. Current data suggest the decline was rather more than 3/4 per cent. In July, the data available would have included the national accounts estimate for the first quarter and some observations of the industrial production index and other series for the second. The first national accounts estimates of the first quarter decline were exaggerated, however. In August 1971, (NIER no. 57, page 5, table 1) our estimate of the first quarter fall in ‘compromise’ GDP was 3 per cent, whereas now (page 23, table 1), we put it at 1.8 per cent.

^{Note (1) page 10} Cf. page 8 above.

^{Note (2) page 10} The introduction of more stringent recording procedures is believed to have produced an element of over-recording late in the year, associated with the accelerated presentation of documents. In the analysis which follows, it has been assumed that the errors in each month affected pro rata the recorded values of all exports other than ships and aircraft.

^{Note (3) page 10} These figures omit miscellaneous exports, partly because these include some manufactures, partly because the effect of the postal strike was concentrated in this category.

^{Note (4) page 10} Of the total value of diamond exports of £380 million, £120 million was recorded as destined for the Irish Republic, against only £25 million in 1970, and on the import side of the accounts, a similar increase in arrivals of diamonds from the Republic is implied. As, moreover, in the first eleven months of 1971, the Irish trade accounts show imports of diamonds from the United Kingdom as less than £¼ million, with exports even smaller, it seems most likely that the UK figures do no more than reflect a movement to and fro of industrial diamonds sent for processing at the free port of Shannon.

^{Note (5) page 10} Estimated deliveries of ships and aircraft are excluded from the figures on which this analysis is based.

^{Note (6) page 10} The rise to the United States, however, would probably have been a good deal higher but for the dock strike, and that to Canada somewhat lower (since it appears that some exports were diverted to Canadian ports while those on the East coast of the United States were closed).

^{Note (1) page 12} Taking the first three quarters of 1971 compared with the corresponding period of 1970, UK manufactured export prices rose by nearly 9½ per cent (in dollar terms) against a rise for all industrial countries of less than 4½ per cent (Statistical appendix table 19). Using the export price figures employed in making the trade forecast (page 67), incorporating estimates for the fourth quarter of 1971, and applying OECD weights to allow for third market competition, the deterioration in UK price competitiveness in 1971 is estimated at nearly 4 3/4 per cent.

^{Note (2) page 12} Cf. page 10.

^{Note (1) page 13} National Institute Economic Review no. 55, February 1971, page 30.

^{Note (2) page 13} House of Commons Debates, 30 March 1971, col. 1366.

^{Note (1) page 14} As did the official forecasters. The Chancellor noted in his budget speech that ‘The visible trade figures are likely to show a moderate deficit on average over the year’. ibid.

^{Note (1) page 15} We anticipated a 3 per cent improvement, year-on-year (National Institute Economic Review no. 55, February 1971, page 30). This compares with a probable actual improve ment of 3¼ per cent (this Review, page 29).