Oecd Economic Surveys: United Kingdom 2003-2004 (Oecd Economic Surveys)

Table of contents......Page 5 Basic statistics of the United Kingdom (2002)......Page 9 Assessment and recommendations......Page 11 Recent developments......Page 25 Figure 1.1. Key indicators in long-term and international perspective......Page 26 Figure 1.2. Magnitude of recent output gaps......Page 27 Box 1.1. Evaluation of the case for EMU entry......Page 28 Figure 1.4. Real and nominal growth differentials between consumption and GDP growth......Page 29 Figure 1.6. Real household wealth......Page 30 Figure 1.8. Relative performance of manufacturing and services......Page 31 Figure 1.9. External trade......Page 32 Figure 1.10. The change in monetary and fiscal stance......Page 33 Monetary policy......Page 34 Figure 1.11. RPIX and HICP inflation......Page 35 Figure 1.12. The wage share and inflation......Page 36 The outlook: growth revives again......Page 37 Table 1.1. Recent outcomes and short-term projections......Page 38 The main policy challenges......Page 39 Figure 1.14. The sources of real income differences......Page 40 Figure 1.16. The contributions of labour utilisation and productivity to trend GDP per capita growth......Page 41 Notes......Page 43 Bibliography......Page 44 The housing market in international context......Page 45 Figure 2.2. House building......Page 47 The housing market as a source of macroeconomic instability......Page 48 Table 2.1. Household financial liabilities......Page 49 Figure 2.4. Household interest payments relative to disposable income......Page 50 A scenario with falling house prices......Page 52 What is the appropriate policy response?......Page 53 Should fiscal instruments be used to counter instability in the housing market?......Page 54 Do mortgage markets need reforming?......Page 55 Improving housing supply......Page 56 Box 2.1. The Barker review of housing supply......Page 57 Assessment......Page 58 Notes......Page 59 Bibliography......Page 62 Annex 2.A1. Consumption equation including housing wealth......Page 64 Table 2.A1.1. Response of consumption to housing wealth......Page 65 Introduction......Page 67 The aggregate fiscal position......Page 68 Table 3.1. Public sector finances: selected summary indicators and official projections......Page 69 Box 3.1. The 2002 and 2003 Budgets and the 2003 Pre-Budget Report......Page 70 Will the fiscal rules be met?......Page 71 Box 3.2. The fiscal framework......Page 72 Figure 3.1. Tax-to-GDP ratio......Page 73 Figure 3.2. Non-North Sea corporation tax receipts......Page 74 Figure 3.3. OECD projections of general government finances......Page 75 Figure 3.4. Health and education expenditure in international perspective......Page 76 Figure 3.5. Speed limits have been reached for public spending......Page 77 Buying more inputs.........Page 78 Figure 3.6. Earnings and working time in health care and education......Page 79 Table 3.2. Employment growth in the public sector......Page 80 ... turning more input into more output.........Page 81 Figure 3.8. Performance in health care and education......Page 82 ... and better outcomes......Page 83 Performance management, targets and incentives......Page 84 Table 3.3. Examples of targets in the Public Service Agreements for health care and education......Page 85 Getting incentives right is crucial to achieve targets......Page 88 Box 3.4. Activity-based funding, incentives and waiting times in health care......Page 91 Figure 3.9. Waiting times, spending and incentives......Page 92 Assessment......Page 93 Notes......Page 96 Bibliography......Page 99 Annex 3.A1. An equation for corporation tax receipts......Page 101 Annex 3.A2. Potential output growth estimates......Page 102 Table 3.A2.1. Decomposition of trend growth......Page 103 Labour utilisation......Page 105 Figure 4.1. Unemployment and inactivity rates......Page 106 Figure 4.2. Working age claimants of incapacity-related benefits and unemployment......Page 107 Policies to reduce unemployment and inactivity......Page 108 Box 4.1. New Deal Programmes......Page 110 Table 4.1. New Deal summary statistics......Page 111 Closing the productivity gap......Page 112 Figure 4.4. Human capital explains part of the productivity gap......Page 113 Figure 4.5. Basic literacy of the adult population and of the young......Page 114 Figure 4.6. Educational attainment of the adult population......Page 115 Table 4.2. Educational attainment of the young studying and graduating now......Page 116 Table 4.3. Continued adult training and education......Page 117 Box 4.2. Upgrading the skills of adults......Page 118 Figure 4.7. Expenditure on tertiary education institutions......Page 120 Boosting investment......Page 122 Figure 4.8. Business investment per worker......Page 123 Figure 4.9. Regulation and investment in information and communication technology......Page 124 Figure 4.10. Pick-up in multi-factor productivity growth and increase in ICT investment......Page 125 Figure 4.11. Government investment......Page 126 Assessment......Page 127 Notes......Page 129 Bibliography......Page 131 Annex 4.A1. Funding of tertiary education in OECD countries......Page 135 Figure 4.A1.1. Tuition fees in tertiary education......Page 136 Figure 4.A1.2. Public loans to students in tertiary education......Page 137 Table 4.A1.1. Funding of tertiary education in OECD countries......Page 138 Overview......Page 143 Indicators of the intensity of product market competition......Page 144 Table 5.1. Output, employment and productivity......Page 145 Figure 5.1. Indicators of product market regulation......Page 146 Table 5.2. Hirshman-Herfindahl indices of industry concentration......Page 147 Figure 5.2. Average mark-ups by market structure......Page 148 Table 5.3. Import penetration by manufacturing industry......Page 149 Figure 5.3. Foreign direct investment outflows and inflows......Page 150 Table 5.4. Gross domestic expenditure on R&D as a percentage of GDP......Page 151 Competition legislation and enforcement......Page 152 Table 5.5. Share of high-technology R&D spending in manufacturing......Page 153 Box 5.1. Competition institutions......Page 154 Coverage and exemption issues......Page 155 Market studies and investigations......Page 156 Regulatory policies......Page 157 Retail distribution......Page 158 Figure 5.5. Summary indicators of regulation in retail distribution......Page 160 Figure 5.6. Five-firm market concentration in food retailing in EU countries......Page 159 Figure 5.7. New retail floor space in town centres and out of town......Page 161 Table 5.7. Own-label penetration in European packaged grocery......Page 162 Table 5.8. Measures of profitability in food retailing......Page 163 Professional services......Page 164 Table 5.9. Regulation indices for professional services......Page 165 Network industries......Page 167 Figure 5.8. Estimates of incumbent operators’ market share......Page 169 Figure 5.9. Average monthly telephone charges......Page 170 Table 5.10. Prices for unbundled local loop......Page 171 Table 5.11. Competencies and resources of energy sector regulators......Page 172 Table 5.12. Electricity market indicators and implementation of the EU Electricity Directive......Page 173 Table 5.13. Gas market indicators and implementation of the EU Gas Directive......Page 174 Table 5.14. Electricity and gas retail prices......Page 175 Table 5.15. Rail infrastructure investment in EU countries......Page 178 Figure 5.11. Funding and oversight of the rail industry......Page 180 Table 5.16. Rail traffic on the British national rail network......Page 181 Box 5.3. Rolling stock......Page 182 Summary and recommendations......Page 183 Retail......Page 184 Network industries......Page 185 Notes......Page 187 Bibliography......Page 191 Performance......Page 195 Policies......Page 196 Table 6.1. Main indicators: climate change......Page 197 Figure 6.1. Greenhouse gas emissions......Page 198 Main issues......Page 200 Policies......Page 201 Table 6.2. Main indicators: trade......Page 202 Table 6.3. Main indicators: development co-operation......Page 203 Table 6.4. Producer support equivalents and their components......Page 204 Main issues......Page 206 Policies......Page 207 Table 6.5. Performance indicators: sustainable retirement income......Page 208 Figure 6.2. Effect of reforms on public pensions......Page 210 Conclusions......Page 212 Notes......Page 213 Bibliography......Page 215 Glossary of acronyms......Page 219 Annex A. Progress on structural reforms......Page 221 Annotation. A special feature of this report (dated March 2004) is product market competition and economic performance. The UKs recent macroeconomic performance has been impressive but the main challenges are to contain instability in the housing market, to spend public money efficiently and to close the productivity gap. Monetary policy tightening should be pursued. The "golden rule" of fiscal policy (over the course of the economic cycle the UK government should not borrow to finance current expenditure) may come under strain in future. Public expenditure growth should be slowed on efficiency grounds and longer-term there is a strategic choice between higher taxes and user charges (such as tuition fees for undergraduates). Increased government investment in transport is welcome but road charging schemes may also be needed. Ensuring income adequacy for the retired will remain a challenge