The Scottish economy [October 1977]

Recent reductions in the rate of inflation and interest rates, coupled with the movement of the UK balance of payments current account into substantial surplus, suggest that it is now appropriate to consider reflation as a means of lifting the labour market from its current state of depression. However, general measures to stimulate aggregate demand such as reductions in direct or indirect taxation will take some time to effect a rise in employment. The speed of reaction will depend on the extent to which increased incomes are initially saved, on the degree of confidence which employers show in the strength of the upturn and on the amount by which output can be expanded without hiring additional men. These delays are likely to be of such a magnitude that an expansionary budget in November will not affect the trend increase in unemployment until mid-1978.