CONFIDENTIAL AN ECONOMIC ADVISERS...
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CONFIDENTIAL
AN
ECONOMIC ADVISERS' COUNCIL (EAC)
The
purpose o f t h i s paper i s p r i n c i p a l l y
important Council
p r a c t i c a l questions (EAC)
t o s e t o u t t h e most
about how an Economic
m i g h t o p e r a t e and be o r g a n i s e d .
Advisers'
Wider i s s u e s
such
as hov; i t m i g h t r e l a t e t o o t h e r b o d i e s such as NEDC o r P a r l i a m e n t
are only
t o u c h e d on i n p a s s i n g .
An EAC v/ould be i n t e n d e d
2. a
^/ *
to provide
t o serve
several objectives:
an a u t h o r i t a t i v e and i n d e p e n d e n t
opinion
on i s s u e s o f economic p o l i c y b o t h t o t h e Government, t o
Parliament b.
and t o t h e p u b l i c g e n e r a l l y ;
t o promote a w i d e r and d e e p e r u n d e r s t a n d i n g
o f t h e most i m p o r t a n t
o f some
t o p i c ? l economic i s s u e s o f t h e d a y ;
and
c.
i n p a r t i c u l a r , perhaps, t o help
understanding
i n c r e a t i n g wider
and a c c e p t a n c e o f t h e need t o overcome
i n f l a t i o n , and o f t h e p o l i c i e s t h a t r e q u i r e s .
I t c o u l d be i n t r o d u c e d
on i t s own, o r as p a r t o f w i d e r moves t o s e t
i n m o t i o n t h e p r o c e s s o f economic e d u c a t i o n a s s o c i a t e d w i t h t h e "Forum" i d e a .
and i n f o r m a t i o n
The i s s u e s e x p l o r e d
belov; a r e
consistent with either a l t e r n a t i v e .
TERMS OF REFERENCE AND AGENDA
3.
I t would be n a t u r a l t o e x p e c t t h e EAC t o u n d e r t a k e two k i n d s
o f work, and f o r them t o be r e f l e c t e d i n i t s terms o f r e f e r e n c e :
f i r s t , r e g u l a r r e p o r t s on t h e c e n t r a l i s s u e s o f economic p o l i c y ;
and
s e c o n d , a number o f ad hoc r e p o r t s on i m p o r t a n t
day.
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issues of the
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i. but
The
regular reports
c o u l d be
p r o b a b l y not more f r e q u e n t .
once o r t w i c e T h e i r form
yearly,
and
timing
w o u l d depend on a v a r i e t y o f m a t t e r s , many o f w h i c h at a l a t e r stage.
o n l y be r e s o l v e d
i n c l u d e w h e t h e r o r not
there
the Budget, the t i m e t a b l e s and ii.
can
Relevant f a c t o r s
i s a Forum, t h e t i m i n g
of
f o r s e t t i n g monetary t a r g e t s ,
the a n n u a l p a t t e r n o f t h e wage r o u n d .
Subject
t o t h e s e r e s e r v a t i o n s and
assuming
two
i t would be n a t u r a l t o p r o d u c e
regular reports a year, one
s h o r t l y a f t e r t h e New
Year i n time to catch
Budget making s e a s o n , and
one
i n the
the
l a t e Summer as
background to the resumption of p a y - b a r g a i n i n g
in
a
the
Autumn.
iii.
The
ground t o be
covered i n a r e g u l a r report
i n c l u d e an a p p r a i s a l o f t h e various The
f o r e c a s t s and The
economic p r o s p e c t and
the
judgement made about i t by
r e a l p u r p o s e would be
on p o l i c y i s s u e s .
would
others.
to focus i m p l i c i t l y or
r e p o r t s m i g h t s p e l l out
c o n s t r a i n t s imposed by economic r e a l i t y , the i n t e r e s t and,
explicitly
the
implications
o f Government p o l i c y o r o f i m p o r t a n t p o l i c y p r o p o s a l s general
of
p e r h a p s , shed l i g h t on more p a r t i c u l a r
economic p r o b l e m s .
iv.
S p e c i a l s t u d i e s c o u l d be
ways.
They c o u l d be
Parliament t h e EAC
i n a v a r i e t y of
c o m m i s s i o n e d o r r e q u e s t e d by M i n i s t e r s ,
o r t h e p a r t i c i p a n t s i n t h e Forum, o r s t a r t e d
i t s e l f without outside
permitted.
pressure;
or both could
Examples o f i s s u e s w h i c h m i g h t , i n t h e
have b e n e f i t e d to the
initiated
from s u c h t r e a t m e n t i n c l u d e :
1973/7^ o i l c r i s i s ;
c o l l a p s e of p r o f i t s ; "case f o r 3horter
use
o f N o r t h Sea
p u b l i c and
the
so
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on.
Oil;
be
past,
adjustment
p r i v a t e s e c t o r pay;
w o r k i n g h o u r s " and
by
the
the
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v.
A l l t h e s e r e p o r t s would
i d e a l l y be w r i t t e n w i t h
more t h a n u s u a l emphasis on p r e s e n t a t i o n . of
The
some o f f i c i a l p r o s e and t h e somewhat academic
used by most e c o n o m i s t s , by t h e German Wise Men CEA must be a v o i d e d as f a r as
American vi.
style
or the
w i l l be most
t o e s t a b l i s h i t s e l f f i r m l y i f i t has a w e l l d e f i n e d
d e s t i n a t i o n t o w h i c h i t must r e p o r t . more f u l l y
To f u l f i l
T h i s p o i n t i s made
i n a b r i e f n o t e by T r e a s u r y o f f i c i a l s w h i c h i s
annexed t o t h i s
particularly
paper.
t h e e d u c a t i o n t a s k p r o p e r l y , t h e EAC
i t s chairman
Members - and
- would have t o p r e s e n t t h e i r v i e w s t o
t h e o u t s i d e w o r l d from t i m e t o t i m e b o t h i n p u b l i c and on t e l e v i s i o n and r a d i o ;
before s e l e c t committees;
c o n f e r e n c e s and s e m i n a r s ; Forum.
possible.
P a s t e x p e r i e n c e s u g g e s t s t h a t t h e EAC
likely
4.
reticence
in private:
at o c c a s i o n a l
and p r o b a b l y p l a y a c e n t r a l r o l e i n t h e
T h i s v/ould have t o be c l e a r l y u n d e r s t o o d f r o m t h e
and s h o u l d e i t h e r be a f e a t u r e o f t h e terms
start
of r e f e r e n c e , or of
any l e t t e r o f g u i d a n c e g i v e n by M i n i s t e r s a t t h e o u t s e t .
*- LOCATION AND 5.
Where t h e EAC
s t a t u s , how how
STATUS
i s based has a c o n s i d e r a b l e b e a r i n g on i t s
i t s work would be r e g a r d e d by t h e o u t s i d e w o r l d
i t s members a r e a p p o i n t e d .
and
Given a p a r t i c u l a r l o c a t i o n , i t s
r e l a t i o n s h i p w i t h i t s p a r e n t body c o u l d be c l o s e , i n v o l v i n g f o r
example s h a r e d s t a f f ; more t h a n "pay
or i t c o u l d be d i s t a n t , i n v o l v i n g
and r a t i o n s " i n common.
a l t e r n a t i v e s , i t has t o be borne
I n w e i g h i n g up
little
these
i n mind t h a t t h e r e a r e many
c h e a p e r and s i m p l e r ways o f i n c r e a s i n g t h e r a n g e o f economic
a d v i c e a v a i l a b l e i n t e r n a l l y t o M i n i s t e r s t h a n c r e a t i n g an However, much o f the p u r p o s e
o f an EAC
i s t o have a p u b l i c
To do t h a t r e q u i r e s a g e n u i n e l y i n d e p e n d e n t authorities.
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impact.
body, w h i c h i s seen t o
be and b e l i e v e d t o be " f r e e s t a n d i n g " , and not m e r e l y a horse of the
EAC.
stalking
p
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'6.
i. To
I t c o u l d be based i n some way i n t h e T r e a s u r y .
some e x t e n t
Treasury's ii.
t h i s might h e l p access
t o d a t a and t h e
own model.
A n o t h e r range o f a l t e r n a t i v e s would be a t t a c h m e n t
t o No 10, t h e CPRS, o r t h e C a b i n e t
Office.
l o c a t i o n has a number o f p r e c e d e n t s .
This kind of
I t would
crudely
p a r a l l e l t h e A m e r i c a n CEA, w h i c h r e p o r t s d i r e c t t o t h e
President.
iii.
—
I t c o u l d be c r e a t e d a s an a d j u n c t
t o a Parliamentary
body, f o r example an Economic o r T r e a s u r y i f one were e v e r
created.
S e l e c t Committee
However, such a f o r m a l
l i n k might
make i t more awkward t o g e t t h e r i g h t members and s t a f f , a t
l e a s t u n t i l S e l e c t Committees have become more s t a b l e and
consistent bodies.
F u r t h e r m o r e , i t i s i n no way
i f one wants an EAC w i t h a P a r l i a m e n t a r y be a s s u r e d
necessary
l i n k , which
almost r e g a r d l e s s o f l o c a t i o n .
could
'Were t h e r e t o be
d i r e c t i o n o r c o n t r o l by a S e l e c t Committee t h e EAC c o u l d
w e l l become s e r i o u s l y c o n s t r a i n e d i n u n p r e d i c t a b l e
iv. and
t/
0
ways.
I t c o u l d be r e l a t e d - l o o s e l y o r c l o s e l y - t o t h e NEDC
NEDO.
enlarged
T h e r e would be a c e r t a i n l o g i c i n t h i s i f an
NED C o u n c i l were t o be t h e n u c l e u s
s i n c e t h e EAC would p r e s u m a b l y p r o v i d e
f o r t h e "Forum",
important
input
into
t h e C o u n c i l , b u t t h e same k i n d s o f argument would p o i n t t h e
o t h e r way i f t h e Forum were t o be l o c a t e d e l s e w h e r e .
The
EAC's a c t i v i t i e s would n o t f i t i n v e r y n a t u r a l l y w i t h t h e
n o r m a l work o f t h e NEDO o r g a n i s a t i o n , and t h e r e m i g h t be
awkward q u e s t i o n s f r o m t h a t o f NEDO.
about s e p a r a t i n g i t s r o l e and managenent
Furthermore, i t s part i n the a c t i v i t i e s
o f t h e Forum c o u l d be s u p p o r t e d
almost e q u a l l y w e l l from t h e
o t h e r l o c a t i o n s , r e g a r d l e s s o f where t h e Forum i s b a s e d .
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v.
Finally
i t c o u l d be f o r m a l l y q u i t e " i n d e p e n d e n t "
l i k e a S t a n d i n g R o y a l Commission have some d i s a d v a n t a g e s . w h i c h seems t o be f u l l y objectives. are
7. to
could
arrangement
c o n s i s t e n t w i t h t h e EAC's b a s i c
A l l the other a l t e r n a t i v e s discussed
above
AND
o f i n d e p e n d e n c e , though not a l w a y s s e r i o u s l y so.
DOCTRINES
The p o l i t i c a l
up an EAC
But i t i s t h e o n l y
This
d i f f i c u l t t o r e c o n c i l e f u l l y w i t h the appearance or
reality POLITICS
o r Quango.
and d o c t r i n a l b a l a n c e t o be sought i n s e t t i n g
are important issues.
e x p e c t t h a t t h e EAC
W h i l e i t would be
s h o u l d be t o t a l l y
unrealistic
apolitical,
i t would,
e q u a l l y , be i n e f f e c t i v e i f i t v/ere seen as i n e s s e n c e a partisan organisation.
How
politically
to f i n d the " j u s t e m i l i e u " i s something
t o be v/orked out i n p r a c t i c e r a t h e r t h a n d e f i n e d i n p r i n c i p l e .
But i t would c l e a r l y be r e a s o n a b l e t o e n v i s a g e an EAC of 8.
one o r two
whose members v/ere known t o be s y m p a t h e t i c t o t h e Government*.
A somewhat s i m i l a r i s s u e a r i s e s o v e r what b r e a d t h o f economic
p h i l o s o p h y and d o c t r i n e t h e membership s h o u l d embrace. o n l y t o i n c l u d e one narrow s c h o o l o f t h o u g h t , whether
Were i t
monetarist,
**" K e y n e s i a n o r any o t h e r , t h e EAC's a u t h o r i t y and c r e d i b i l i t y not
be v e r y g r e a t .
would
At t h e o t h e r e x t r e m e , a membership e m b r a c i n g
b o t h a n e a r M a r x i s t member o f t h e "New
Cambridge" Group and a
pure F r i e d m a n i t e would make i t u n l i k e l y t h a t t h e EAC
could
agree
about a n y t h i n g o f i n t e r e s t .
9.
The means by w h i c h t h e key members o f t h e EAC a r e s e l e c t e d
has a b e a r i n g on b o t h i s s u e s .
I f n o m i n a t i o n i s i n t h e hands o f
M i n i s t e r s , t h e n a c o h e r e n t body can be c o n s t i t u t e d , though a t t h e
* The " f i v e v/ise men" i n t h e German A d v i s e r s C o u n c i l (known as t h e
Sachverstflndigenrat)are a l l i n d e p e n d e n t s p o l i t i c a l l y , w h i l e t h e more
s e n i o r members o f t h e A m e r i c a n CEA a r e n o r m a l l y w e l l - k n o w n Democrats
or R e p u b l i c a n s . T h i s d i f f e r e n c e i n c o m p o s i t i o n r e f l e c t s a d i f f e r e n c e
in roles. The CEA i s g e a r e d above a l l t o a d v i s i n g t h e P r e s i d e n t ,
hence t h e u n a v o i d a b l y p o l i t i c a l n a t u r e o f i t s membership. The German
C o u n c i l i s intended to educate the p u b l i c , f o r which purpose the l e s s
p o l i t i c a l c o l o u r i n g the b e t t e r .
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r i s k o f t h e i r b e i n g swept away and r e p l a c e d "en masse" the
Government changes.
the
gift
whenever
V/ere t h e r e t o be s e a t s e f f e c t i v e l y i n
o f t h e CBI and TUC
o r a S e l e c t Committee, t h e n
striking
a proper p o l i t i c a l
o r d o c t r i n a l b a l a n c e would be much more a
m a t t e r o f chance.
And t h e e f f e c t s o f e l e c t i o n s m i g h t not be
that
different.
MEMBERSHIP
10.
i.
I n p r a c t i c e t h e EAC
would i n e v i t a b l y have as i t s
k e r n e l a s m a l l number o f key f i g u r e s .
I t would have t o
have some s t a f f b a c k i n g , t h o u g h not n e c e s s a r i l y much o r
entirely f u l l ii.
time.
There would be room f o r c h o i c e i n d r a w i n g t h e
d i v i d i n g l i n e between have f i v e
"members" and " s t a f f " .
The Germans
"members" and a s m a l l anonymous s u p p o r t i n g
s t a f f , w h i c h i s based on t h e Bundesamt f i l r S t a t i s t i k , f o r
whose r o l e t h e r e i s no e x a c t B r i t i s h a n a l o g u e . A m e r i c a n CEA of
The
c o n s i s t s o f more t h a n a dozen e c o n o m i s t s ,
whom t h e c h a i r m a n and h i s two d e p u t i e s a r e p u b l i c
f i g u r e s o f some r e a l w e i g h t .
iii.
Assuming t h e r e a r e t o be "members" and " s t a f f " , t h e
o b v i o u s a l t e r n a t i v e s would be t h r e e or f i v e members,
i n c l u d i n g the chairman.
More would be u n w i e l d y .
The
q u e s t i o n o f s t a f f numbers cannot be d e t e r m i n e d so s i m p l y .
For
i t w i l l depend
on t h e t e r m and r e f e r e n c e , w o r k i n g
methods and d e c i s i o n s on a number o f o t h e r
practical
i s s u e s , some o f w h i c h a r e d i s c u s s e d e l s e w h e r e .
iv.
The Chairman would o b v i o u s l y have t o be a p e r s o n
of
some w e i g h t , and a goon o r g a n i s e r o f work:,
of
r e c e n t economic d e v e l o p m e n t s , b o t h i n p o l i c y
analysis;
on t o p
and
and, i m p o r t a n t l y , a competent p u b l i c p e r f o r m e r .
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v.
The members c o u l d be f u l l - t i m e , a m i x t u r e , o r
e n t i r e l y part-time w i t h , perhaps,
o n l y t h e head
p u t t i n g i n more t h a n two o r t h r e e days a week on
average throughout assumptions, fairly
the year.
On any p l a u s i b l e
t h e p a t t e r n o f work i s l i k e l y
seasonal.
This could matter
t o be
a l o t , particularly
i f u n i v e r s i t y p o s t s a r e a t s t a k e , o r members (and s t a f f )
have o u t s i d e o c c u p a t i o n s , w h e t h e r t e a c h i n g , r e s e a r c h o r
c o n s u l t a n c y , w h i c h t h e y c a n n o t o r would n o t w i s h t o
abandon.
vi.
The members s h o u l d n o t be s o l e l y p r o f e s s i o n a l
economists be r e g a r d e d word.
or academics, though they s h o u l d , as e c o n o m i s t s
i n the widest
perhaps,
sense o f t h e
One m i g h t a l s o aim t o i n c l u d e some o f t h e
following occupations: person;
financial journalist;
ex-economist p o l i t i c i a n ;
consultant;
or economically
management
literate
City
businessman.
STAFF AND METHOD OF WORK
11.
i.
The s u p p o r t i n g s t a f f would b e s t be drawn p a r t l y
from U n i v e r s i t y or p r i v a t e s e c t o r c i r c l e s , p a r t l y Government s t a t i s t i c i a n s and e c o n o m i s t s Probably
only t h r e e or f o u r f u l l
be needed.
from
on secondment.
time graduates
would
I t w o u l d , i n any c a s e , be d e s i r a b l e t o
define firmly
i n advance t h e l i m i t s o f s t a f f and f u n d i n g
w i t h i n w h i c h t h e o r g a n i s a t i o n was t o o p e r a t e .
ii.
The EAC must be e x p e c t e d
t o draw on work and i d e a s
from a v a r i e t y o f o u t s i d e s o u r c e s , whether
institutions
o r i n d i v i d u a l s , and whether i n t h e UK o r e l s e w h e r e .
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T h i s might
n o t be v e r y e x p e n s i v e p a r t i c u l a r l y i f
such s t u d i e s were as a r u l e p u b l i s h e d , as would i n
any
c a s e be d e s i r a b l e f o r some r o u t i n e work.
to
Access
t h e f o r e c a s t i n g models o f t h e T r e a s u r y and London
B u s i n e s s S c h o o l - a n d , no d o u b t , o f o t h e r b o d i e s i f
need be - c o u l d d o u b t l e s s be a r r a n g e d w i t h o u t
difficulty.
The EAC s h o u l d , as a r u l e , be a b l e t o o b t a i n b a s i c
statistics
and m a t e r i a l f r o m t h e o f f i c i a l machine a t n e g l i g i b l e c o s t
w h e t h e r i n terms iii.
o f money o r t h e w o r k l o a d o f o f f i c i a l s .
A d e c i s i o n would have t o be made about w h e t h e r t h e
EAC was t o h o l d h e a r i n g s o r p u b l i s h e v i d e n c e , p a r t i c u l a r l y
if
i t i s t o be s e t up on l i n e s n o t u n l i k e t h o s e o f a R o y a l .
Commission. danger,
There
seems t o be l i t t l e
i n r e q u i r i n g i t t o do s o .
p o i n t , and some
But e q u a l l y t h e r e would
be no r e a s o n f o r r u l i n g out e i t h e r c o u r s e o f a c t i o n i n t h e
terms o f r e f e r e n c e o r g u i d a n c e .
STARTING UP
12.
There
a r e a number o f u n r e l a t e d but i m p o r t a n t p o i n t s w o r t h
stressing:
i.
t o s e c u r e members o r s t a f f i n t i m e t o b e g i n work by
t h i s Autumn a n d , t h e r e f o r e , t o be i n t i m e t o p u b l i s h Spring w o u l d , i f i t i s p o s s i b l e at a l l , r e q u i r e swift ii.
next
fairly
action;
some o f t h e d e t a i l s o f t h e EAC's shape and modus
o p e r a n d i may i n p r a c t i c e have t o be a m a t t e r f o r n e g o t i a t i o n
w i t h t h e chairman d e s i g n a t e .
So, a f o r t i o r i , may t h e s t a f f .
8
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iii. for
D e c i s i o n s about an EAC would have i m p l i c a t i o n s
t h e way i n w h i c h t h e T r e a s u r y
u n d e r t a k e s and
p u b l i s h e s i t s own f o r e c a s t s , f o r t h e e v o l u t i o n o f
P a r l i a m e n t a r y C o m m i t t e e s , and f o r moves t o w a r d s t h e
Forum i d e a .
iv.
T h i s n o t e d e l i b e r a t e l y d o e s - n o t go i n t o
of p e r s o n a l i t i e s .
But a l i t t l e
questions
t h o u g h t makes i t q u i t e
c l e a r t h a t t h e r e i s n o t a v e r y wide r a n g e o f s u i t a b l e
candidates
from w h i c h t o chose members o r a c h a i r m a n .
CONCLUSIONS AND RECOMMENDATIONS
13.
To sum up t h e key recommendations o f t h i s p a p e r , i f an
EAC i s s e t up i t s h o u l d :
oe i n d e p e n d e n t
have 3 o r 5 members and a s m a l l s u p p o r t i n g - p r e p a r e
staff
one o r two r e g u l a r r e p o r t s a y e a r , and do
some ad hoc s t u d i e s e i t h e r a t t h e r e q u e s t o r on i t s own i n i t i a t i v e ;
and
of others
t h e f i n a l d e t a i l s s h o u l d n o t be f i x e d w i t h o u t c o n s u l t i n
the chairman d e s i g n a t e , or ensuring c o n s i s t e n c y other r e l a t e d
plans.
ADAM RIDLEY
15 June 1979
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with
ANNEX
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ECONOMIC ADVISERS' COUNCIL - PAST EXPERIENCE
Note by T r e a s u r y O f f i c i a l s
1.
There have been
other
a t t e m p t s by C o n s e r v a t i v e a d m i n i s t r a
t i o n s t o s e t up a d v i s o r y b o d i e s w h i c h w o u l d e n c o u r a g e of
t h e economic
problems
f a c i n g the country.
or p r o v e d s h o r t - l i v e d u s u a l l y because
an u n d e r s t a n d i n g
But t h e y have f o u n d e r e d
of o p p o s i t i o n from the t r a d e
unions.
2.
The
closest parallel
t o what we now
have i n mind was
the
C o u n c i l on P r i c e s , P r o d u c t i v i t y and Incomes (COPPI) s e t up i n 1958 "to
keep under r e v i e w changes
level
i n p r i c e s and p r o d u c t i v i t y and
o f incomes" w h i l e " h a v i n g r e g a r d t o t h e d e s i r a b i l i t y
employment and i n c r e a s i n g s t a n d a r d s o f l i f e p r o d u c t i o n and r e a s o n a b l e s t a b i l i t y
based on
of p r i c e s " .
the
of
full
expanding
Its first
two
r e p o r t s , s t r o n g l y i n f l u e n c e d by S i r D e n n i s R o b e r t s o n , a r o u s e d a
s t o r m o f p r o t e s t from t h e t r a d e u n i o n s .
I t s t h i r d and
r e p o r t s , r e f l e c t i n g t h e v i e w s o f a l a b o u r market P r o f e s s o r Henry
economist,
The C o u n c i l was
wound up i n 1961
when i t had become c l e a r t h a t i t had no f u r t h e r u s e f u l
the
Two
P h e l p s Brown, were l e s s u n p a l a t a b l e t o t h e u n i o n s
but had l i t t l e i m p a c t g e n e r a l l y .
3.
fourth
l e s s o n s can be drawn from t h i s
experience:
life.
first,
that
membership o f t h e c o u n c i l needs t o embrace t h e main s t r e a m o f
economic
t h i n k i n g w h i l e a v o i d i n g t h e e x t r e m e s a t e i t h e r end o f t h e
s p e c t r u m i f i t i s t o a v o i d t h e charge o f b e i n g p a r t i s a n ;
second,
t o make a w i d e s p r e a d p u b l i c i m p a c t t h e r e p o r t s need t o be p r e s e n t e d
and d i s c u s s e d i n a w i d e r economic
forum, w h i c h i n c l u d e s b o t h
e m p l o y e r and employee r e p r e s e n t a t i o n .
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