This chapter is in two parts. The first contains a brief account of the current situation and an assessment of the outlook to end-1985. The second discusses the medium-term prospect to 1988.

The recovery in the OECD area gathered pace in the second quarter, when its total GDP probably increased by as much as 1 per cent. The rise was, however, heavily concentrated in North America and particularly the US. There may well have been a slight fall in Western Europe, where the level of industrial production hardly changed and increases in gross product in West Germany and, to a minor extent, in France were outweighed by falls in Italy and (according to the expenditure measure) the UK.

The growth of registered unemployment since the mid-1960s has the appearance of a cycle of increasing amplitude about an accelerating upward trend. Chart 1 illustrates this well. The cyclical variation of unemployment was already familiar before the 1960s and its behaviour is, we would maintain, quite predictable and reasonably well understood. The upward trend, however, was not predicted and its origin and significance are matters of uncertainty and dispute. The nature of the problem is highlighted by the contrast between the upward trend in registered unemployment and the almost trendless series for notified vacancies. These two series and the other labour market indicators in table 1 all show a consistent cyclical movement but their secular growth rates are quite different.

It is now nearly two years since the last of the regular assessments of industrial production in this Review. Whereas these usually looked up to eighteen months ahead, this chapter looks at the medium-term. It discusses, at a disaggregated level, the changes in the structure of the economy that might be implied by the aggregate forecast in chapter I. This discussion is prefaced by an examination of recent trends.

The National Institute studied the diffusion of new technologies more than ten years ago: our first report on this subject was published in 1969 followed by a major book. The purpose of the earlier studies was to analyse the introduction and diffusion of major postwar process innovations in several industrial countries, the factors which facilitate or hinder the adoption of the then new techniques, the pattern of diffusion and the influences to which it is subject. The analysis was based on the situation at the end of the 1960s. Since then the processes, which were then relatively new, have matured. In 1982 we started a new project in order to assess and analyse their diffusion in a later phase.

This article describes research on the analysis of the consequences of changes in personal taxation and social security carried out as part of the SSRC Programme on Taxation, Incentives and the Distribution of Income. It shows how data from the Family Expenditure Survey can be used to see who gains and who loses from policy changes, illustrating this by an examination of proposals for a tax credit scheme. It discusses the incorporation of changes in behaviour, and the effect of taxes and benefits on incentives, including the ‘poverty trap’. Particular emphasis is placed on the accessibility of the analysis, and the last section describes a range of programs which are available for use on micro-computers.