These budgetary developments reflect three main factors. The first, is the operation of automatic fiscal stabilisers, i.e. the reaction to the recession built into the budgets, given the existing social security and tax systems.
Without such renewed corporate profits, firms will be reluctant to invest in research and development or to purchase new efficiency-improving equipment. In many cases, new technologies are introduced into our economy through capital investment, and the important productivity gains of recent years will not be repeated unless businesses continue to invest in new plant and equipment.