In recent years economic forecasting has come under increasing attack for two main reasons. The first is that since 1973 the economic outlook for the United Kingdom has been worse than most people in the economy would have liked. As the purveyors of bad tidings, economic forecasters have been thought, albeit largely unconsciously, to bear some responsibility for the outcome they expect. It is implied that if it is possible to point out the dire consequences of any current policy it should be equally possible to point to a better alternative policy, and hence enable the policymaker to avoid the undesirable outcomes. This very plainly has not happened; judged by the criteria of economic growth, price inflation and unemployment the United Kingdom has done worse since 1973 than in any period of comparable length since the second world war. Indeed comparisons have been made between the last few years, 1979–81, and those of the slump in 1929–33. On that occasion, however, there was no corresponding fear of rising prices. The second source of attack has been on grounds of accuracy. Despite the great advances in technique and the considerably enhanced complexity of macroeconometric models, forecast errors have not fallen markedly during the last decade and have in some instances increased.

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.

The 1975 reduction of energy consumption was chiefly due to the recession; plans and forecasts for 1975-80 indicate a return towards pre-1973 energy usage and the upward trend becomes moderated only in 1980-85. Europe's relative dependence on imported oil is likely to decline, due to increased production of North Sea oil and of nuclear electricity, as well as to the better utilization of other indigenous sources, though there are some uncertainties about these. Beyond 1985, however, new energy sources are likely to be needed; in order to secure them in time, R & D effort ought to be strengthened now, and on a cooperative international basis.

Over 50 years ago, New Society first identified a new ‘Oxford School’ considered central to British post-war reconstruction. Based around Nuffield College, it contained five key figures: Hugh Clegg, Allan Flanders, Alan Fox, Bill McCarthy and Arthur Marsh. Other identified contributors were Ben Roberts, John Hughes and legal theorist Otto Kahn-Freund. A second generation included the likes of George Bain, Willy Brown, Richard Hyman, Rod Martin and Roger Undy. Intriguingly, as early as the late 1940s its key theorist Flanders described their social democratic approach to build industrial pluralism as the ‘third way’—obviously a phrase given greater prominence in the 1990s by Tony Blair and Tony Giddens.

In the last few years the stability of the world economy has rested upon a prolonged boom in the USA offsetting recession in Japan and a slowdown in other East Asian ‘tiger’ economies. The risk now has to be faced that, if the ‘bubble’ in the US stock market should burst, recessionary influences would spread throughout the OECD area and beyond; and this could happen at a time when the conventional wisdom has lost faith in the effectiveness of ‘reflationary’ monetary and fiscal policies. After re-examining the case for deploying such policies as a positive response to recession, the authors first ask how the rules guiding monetary policy should be amended to reduce the probability of recession, and to counter it if it develops. They then consider the possibilities for fending off or mitigating recession by use of fiscal measures. They conclude by calling for public discussion of the policy issues involved as a basis for the formulation of contingency plans against the non-negligible risk that the balance of the world economy could before long be tilted in a recessionary direction.

The Scotland Bill 2015–16 would make the Scottish government one of the most powerful sub-central governments in the OECD in terms of its control over spending and taxation. The UK government has also announced plans to introduce ‘English Votes for English Laws’ (EVEL), where the support of a majority of English MPs would be necessary to pass legislation deemed to impact on England only. The objective of this paper is to examine the potential for spillovers to arise in monetary unions of asymmetric nations where fiscal policy choices are taken locally. We extend a model of Chari and Kehoe (2008) to show the sub-optimal consequences of devolved fiscal policy in a moneteary union with a dominant member state. Because England is so much larger than the other constituent nations of the UK, its fiscal policy choices will have a commensurately stronger impact on UK monetary policy. As a result, UK monetary policy might be inappropriate for the smaller nations, calling into question the economic efficiency of EVEL. This is a general result which arises from the asymmetry of nations rather than specific UK funding arrangements or behavioural responses.

Most users of medium-term economic forecasts turn to them because they want to know what the economic future will actually be like, so that they can plan accordingly. Further, a very wide range of alternatives will not be particularly helpful; and many users—given the uncertainties in any case inherent in deducing from a general economic forecast the prospects for an individual firm—prefer a single set of numbers for the medium-term economy.

Throughout the 1950s and 60s the framework within which macroeconomic policy was conducted in the UK appeared to be relatively uncontentious. Government policy was designed to achieve certain economic objectives, which typically included full employment, stable prices, economic growth and balance of payments equilibrium, by appropriately setting various instruments of policy, such as tax rates and the exchange rate. The relationship between particular instruments and objectives was often disputed, and the advisability of ‘fine tuning’ was questioned, but the basic ‘instruments to objectives’ approach to policy was generally accepted.

This paper summarises research on the labour market done over the past two years at the National Institute. It incorporates research into the determinants of employment—including the role of forward-looking behaviour—wage inflation and real wage models, and comments on some policy issues which have arisen in the past five years or so. The research was not aimed at producing a single approach to labour market behaviour, but touched on several separate topics. In part the present paper reflects this relative heterogeneity, although we will try to emphasise common themes where these are relevant.

Conditionality has increasingly been part of benefit entitlement and its effects have been examined in a number of ways. While the focus of previous research has been on general conditions such as job search and acceptance of job offers, this paper examines conditionality specifically in relation to participation in training. Using data from a qualitative evaluation of a government programme, the Skills Conditionality pilot, the paper uses two hypotheses to critically assess the effectiveness of conditionality as a benefits policy: that it is successful in increasing participation in training; and that it is harmful by reducing time for job search.