Conflicts over north sea oil profits and macro-economic policy

Summary and Appraisal

National Institute Economic Review ◽

10.1177/002795018913000101 ◽

1989 ◽

Vol 130 ◽

pp. 3-6

Keyword(s):

Economic Policy ◽

Exchange Rate ◽

North Sea ◽

Output Growth ◽

Balance Of Payments ◽

Export Growth ◽

Consumer Spending ◽

Fixed Investment ◽

Difficult Time ◽

World Markets

The new Chancellor, John Major, has taken office at a difficult time for the conduct of economic policy. The boom of the late 1980s has spent its force, but as yet there is no sign of the improvement in the balance of payments, or the reduction in inflation one might expect as a consequence.In our main forecasts we show output growth in 1990 of just over 1½ per cent, less than 1 per cent excluding North Sea oil production. Consumer spending, which gave the main impetus to the early stages of the boom, will hardly rise next year and stock building is expected to turn negative. Fixed investment is unlikely to contribute much to the growth of demand year-on-year. The fall in the exchange rate during this year will help to sustain export growth next year, although world markets will not be as buoyant as they have been in 1989.

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Chapter I. The Economy in 1977

National Institute Economic Review ◽

10.1177/002795017808400102 ◽

1978 ◽

Vol 84 ◽

pp. 6-21

Keyword(s):

Economic Policy ◽

North Sea ◽

Current Account ◽

Effective Rate ◽

Balance Of Payments ◽

Price Inflation ◽

Import Prices ◽

The North ◽

The North Sea

British economic policy in 1977 was conducted for the most part within the confines of the undertakings given to the IMF in the Letter of Intent of December 1976. Partly as a result, output stagnated almost completely and unemployment rose slowly and erratically by a further 100 thousand during the year. The operation of Stage II of the pay policy during the first half of the year and the almost universal acceptance of the 10 per cent settlements guideline during the second half meant that the wage and salary bill was just under 10 per cent higher in 1977 than in 1976, compared with an increase of over 13 per cent in the previous year. Import prices rose by 16 per cent year-on-year (partly because of the sharp effective depreciation of sterling in late 1976) but the rate of consumer price inflation slowed a little, from 15 1/2 per cent during 1976 (that is, between the final quarters of 1975 and 1976) to just over 14 per cent last year. Despite the virtual stagnation of home demand, the depreciation of sterling (the effective rate was 5 per cent lower on average in 1977 than in 1976) and the net increase in the North Sea oil benefit from about £0.5 billion in 1976 to over £2 billion in 1977, the current account of the balance of payments reached only bare balance (from a 1976 deficit of just over £1 billion).

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