Before the May 1979 General Election there were suggestions from both sides of industry and from all political parties that, in the wake of the collapse of a more-or-less formal incomes policy, there should at least be some sort of national ‘forum’ to discuss the implications for the economy of different outcomes of pay bargaining rounds. It is now clear that the Government has for the time being decided not to set up a new body of this kind. Nevertheless the issues which such a body would have to consider remain, and it seemed to us worthwhile to attempt to set out the kinds of question which should be borne in mind by all parties concerned with pay bargaining and pay determination during the coming wage round. What follows is deliberately written in a non-technical way: at the same time, we hope not to have done serious injustice to the complexity of the problems.

Our view of the short-term prospects for the domestic economy has worsened markedly since May. This is only in part because of the Budget of 12 June: indeed it is important to bear in mind, if comparisons are made with the May forecasts, that we had allowed for public expenditure cuts for 1979/80 on the scale which has now been announced and we also built in the indexation of both personal tax allowances and specific indirect taxes and duties. Thus, so far as the change in the outlook for the current financial year is concerned, the Budget effects are broadly limited to the move to a uniform VAT rate of 15 per cent together with the cuts in personal income tax rates. For 1980/81, we have reduced our public expenditure volume forecast substantially from the figures given in May. The other major factor tending to alter the outlook was the unexpectedly rapid growth this year of imports.

The world economic outlook continues, in the eyes of most observers, to be dominated by the oil situation. It is clear that in May we were over-optimistic as regards both shortages and prices. Nevertheless some of the gloom that has been generated still seems to us rather excessive.

The new official estimates, using 1975 constant prices, provide the basis for assessing the growth rates from 1956-7 to 1977-8 as well as the changing importance, i.e. weights, of the following parts of the British economy: the main economic sectors, the main industrial categories, the manufacturing industries, and the branches of mining and trans port and communications.

This article discusses the experience to date with monetary targets. The first section briefly surveys the historical background to the adoption of monetary targets and gives a résumé of monetary policy during the last three years. Without delving deeply into the subtleties of the complicated art of central banking, the next section gives an inter pretation of what the Bank of England actually does when it attempts to control the money supply, which does not correspond at all closely to the simple representation of the techniques of money supply control contained in some of the standard economics textbooks. Attention is also drawn to the problems of the present approach to monetary policy making. Finally an assessment of the performance of recent policy is offered.

In little more than 20 years the share of the largest firms in manufacturing output in the UK nearly doubled, from 22 per cent in 1949 to 41 per cent by 1972. Important features of this increase have been the enormous growth in the number of separate plants operated by these firms (the average number per firm went up from 27 to 72 between 1958 and 1972) and the related spread of their interests into practically every sector of the economy. Diversification accompanied by large size raises two central issues: first, what is the effect on competition and resource allocation between industries and, secondly, how efficient is the internal organisation of the largest companies? The main emphasis of the study summarized here was on the first of these questions, although the estimates of the extent and scope of diversification amongst the largest manufacturing firms also have a direct bearing on the second.