§ 7. Mr. Desmond Swayne (New Forest, West)If he will make a statement about the UK's position in the economic cycle relative to that of the rest of the EU. [56864]
§ The Economic Secretary to the Treasury (Ms Patricia Hewitt)At present, the United Kingdom's business cycle is clearly not convergent with that of the rest of our European partners. However, the United Kingdom's divergence is not a new factor and is in part a legacy of our past susceptibility to boom and bust—the damaging boom of the late 1980s and the recession of the early 1990s, when the shadow Chancellor was a Treasury 1003 Minister, when manufacturing output fell by 7 per cent. and when half a million manufacturing jobs were lost—and the failure to raise interest rates in the run-up to the last general election.
§ Mr. SwayneI have always wondered what caused the business cycle. Will the hon. Lady comment on the fact that The Economist has pointed out that, since June, forecasts for the British economy have shown that the growth rate is set to fall by 56 per cent., but that, for the corresponding period, growth rates for France will fall by only 14 per cent. and for Germany will fall by 21 per cent? Why is it so much worse here? Has it anything to do with the Chancellor of the Exchequer's policies?
§ Ms HewittThe hon. Gentleman may not understand the basics of the business cycle, but presumably he understands that forecasts for world growth have been slashed as a result of what is going on in the world economy; that this country—[Interruption.] Just listen a minute and give the hon. Gentleman a chance to learn. This country is not immune from what is happening in the rest of the world. We have a larger exposure to trade with the rest of the world than most of the continental countries, but if the hon. Gentleman looks at the three-year period starting last year, he will see that, even with our revised growth forecasts for next year, growth in France, Germany and the United Kingdom will be about the same. Perhaps the hon. Gentleman will also recall that unemployment in this country is well below the level in France and Germany.
§ Dr. George Turner (North-West Norfolk)Does my hon. Friend agree that what matters is not only where we are in the business cycle, but how big the peaks and troughs in that cycle are; and that today's welcome news shows that the peak in interest rates required to control that is at least half of what we had last time? Does she also agree that the next movement in interest rates is more likely to be downward, because the world knows that it was a technical, non-party political decision that was taken today?
§ Ms HewittI am delighted that my hon. Friend welcomes both today's decision and the steps that we have taken to create economic stability. It is the Conservative party that is the party of boom and bust; we are the party of economic stability.
§ Sir Peter Tapsell (Louth and Horncastle)Do Treasury Ministers agree that, for the British people sensibly to decide whether sustainable economic convergence between the United Kingdom and continental Europe can be achieved and whether economic benefits to this country of a "clear and unambiguous" nature—I am quoting the two criteria mentioned by the Prime Minister yesterday— would flow from joining economic and monetary union, it is extremely important that, as almost all independent economists agree, two complete economic cycles be concluded before any judgment based on those criteria is reached? Do Treasury Ministers agree with that assessment?
§ Ms HewittI thank the hon. Gentleman for giving us the benefit of a speech that I am sure that he made during the Conservative party's referendum on that issue. 1004 We have set out the five economic tests that will enable the Government and the country to decide whether sustainable convergence has been demonstrated. Unlike the Conservative party, we have a policy for monetary and fiscal stability that will enable those tests to be met in future.