Financial Resolutions, 1978: Financial Statement, Budget, 1978. - The economy in 1977
Last year, we achieved the highest growth rate in the EEC and the second highest in the OECD. The economy expanded by over 5 per cent—twice the EEC average and well above the OECD average of 3½ per cent.
The Economic Background to the budget, which was published on 24 January, gives a detailed review of the economy in 1977 and I do not propose to dwell at length on that topic today. Growth apart, the most notable development in 1977 was the dramatic fall in inflation. The annual average fell from 18 per cent in 1976 to 13½ per cent last year. Even more significant was the fall in the 12 months to mid-November, when prices rose by less than 11 per cent, compared with over 20 per cent in the 12 months to mid-November 1976.
There was also useful progress in raising employment and in tackling unemployment. Because of our rapidly growing labour force, a reduction in unemployment requires a much greater increase in employment. Last year, non-agricultural employment was about 12,000 higher than in 1976, while on a seasonally adjusted basis the Live Register figure of unemployment fell by about 6,000 in the second half of 1977.
Strong investment, strong growth in industrial exports, as well as in private consumption, were notable features of 1977. The growth in industrial investment and exports—the latter rising by over 17 per cent in volume for the second year in succession—is particularly encouraging. The balance of payments deficit remained reasonable, at about £160 million. Buoyant tourism, yielding a large surpus on invisible trade, was a major contributory factor.
The strong private capital inflow resulting from the rising trend in industrial investment contributed to the increase of £245 million in the reserves during 1977, bringing them to £1,200 million by the end of the year.