The Secretary of State for Economic Affairs 'Mr. Peter Shore)
With permission, Mr. Speaker—[Interruption]
§ Mr. Shore
With permission, Mr. Speaker, I should like to make a statement.
As I promised the House last week, the Economic Assessment to 1972 was published today. My intention, in publishing the assessment, is to make available for the widest study and discussion the Government's view of the likely development of the economy over the next four years.
The assessment takes as its starting point the necessity to earn a balance of payments surplus of the order of £500 million a year and to maintain this substantial surplus for a period of years. After allowing for a contribution from non-trade items, we believe it to be prudent to aim at a surplus on visible account of about £300 million a year.
The assessment considers the rates of growth of national output consistent with the surplus which we need. It discusses a range of possible growth rates from an average of a little below 3 per cent. a year to an average of around 4 per cent. a year. Within this range the assessment takes as the starting point for further analysis a basic case of an average growth rate of 3¼ per cent. a year and sets out the reasoning behind this. But this basic case does not constitute a forecast of what will happen. It is, indeed, one of the main purposes of publishing the assessment and the subsequent consultations with industry to help to achieve a higher rate of growth providing always that it is compatible with our balance of payments requirements.
1728 The working population of the country will remain stable over the period of the assessment and we cannot, therefore, expect a contribution to growth as in the past from an increase in the working population. But we do expect a contribution to output from a fall in the level of unemployment, although the speed at which we can increase the level of employment will depend both on our successes with the balance of payments and on the continued success of our regional policies. A strong regional policy will remain essential if we are to make full use of our labour resources in the country as a whole.
To meet our objectives of a substantial surplus and greater economic growth a switch of resources is required. The first claim on our increasing resources must be for exports and imports saving. Secondly, while the share of public expenditure will remain broadly stable, there will be important shifts within the total, particularly a reduction in resources allocated to defence. Thirdly, although private expenditure will increase, there must be a fall in the proportion of resources going to consumption. Lastly, and very important, a larger share must go to productive investment.
Arising from discussions in the N.E.D.C., certain key sectors of industry, including chemicals, vehicles and engineering have been selected for detailed consultations through the E.D.C.s or in other ways as appropriate. A central part of the consultations will be to identify the contribution of these industries to our balance of payments objectives. We shall go on to consider jointly the constraints hindering better economic performance and the action required to remove them. These further consultations with industry will be taken fully into account when we come to revise the assessment.
The assessment starts a new phase in the process of consultation between Government and industry. It begins against the background of real improvement in exports and investment. This must be sustained. To this end, discussions must be wider than the N.E.D.C. and the E.D.C.s and, indeed, wider than this House. The task ahead, which the assessment describes, is one for all of us.
§ Mr. Iain Macleod
Is the right hon. Gentleman aware that we are glad to see him in better health? Although we have fierce views on the future of his Ministry, I would regard it as indelicate to take them up today when we are discussing what, with luck, will prove to be the epitaph of his Department.
The right hon. Gentleman has put a range of three different targets of growth before the House: the basic case of 3¼ per cent., a lower one of 3 per cent., and a higher one of 4 per cent.
First, what is the status of the Green Paper, which I think is being issued this afternoon? Is it entirely a Government document, or is there to any extent an endorsement by the C.B.I. and the T.U.C. even of the range which the right hon. Gentleman has indicated?
Secondly, the original plan estimated a growth of 25 per cent., from 1964 to 1970. Taking the basic case which the right hon. Gentleman has put before the House, he is planning for 24 per cent. growth from 1964 to 1972. Are those figures accurate? If they are, does not this show that the Labour Government have wasted at least two years?
§ Mr. Shore
I thank the right hon. Gentleman for his personal remarks. However, his remarks about the D.E.A., and whether or not this will be its epitaph, only reveal his lack of recent acquaintance with Government Departments and particularly economic Departments.
On the status of the document, it is a provisional economic assessment which we shall be seeking to expand and reinforce following our consultations with industry and the E.D.C.s. As for its status in relation to the N.E.D.C. we did not put it to the N.E.D.C. as a document which we asked it to approve. But, as I said in the House last week, the N.E.D.C. is content with it as a reasonable starting point for consultations with industry.
On the rate of growth, it is true that the basic case is somewhat lower than the 3.4 per cent. increase in productive potential which was foreseen in the 1965 National Plan. It is only marginally less than that rate. But, as the right hon. Gentleman is aware, we are presenting a range of growth rates of which this 1730 is the basic case and not the upper case, which will be higher.
§ Mr. Barnett
Is my right hon. Friend aware that in the 1965 National Plan it was reckoned that a 7 per cent. increase in manufacturing investment would be needed to achieve a 3.8 per cent. growth rate? What rate of increase in manufacturing investment does he reckon he will achieve and how can he do it and, at the same time, strive for a £500 million surplus on the balance of payments, although even that is not as bad as the suggestion of the right hon. Member for Enfield West (Mr. Iain Macleod), who wants a surplus of £750 million? In how many years does my right hon. Friend plan to have a £500 million surplus on the balance of payments?
§ Mr. Shore
The balance of payments surplus is a requirement simply because we have to take account of the very substantial indebtedness which we have built up since 1963. My hon. Friend asks about the growth of investment in manufacturing industry. The document has a great deal to say about that. My hon. Friend will find in the document an increase of about 25 per cent. is suggested.
§ Mr. Maude
The right hon. Gentleman made yet another of the familiar generalised exhortations for import saving. Would he represent to the Minister of Agriculture that our farmers could make a very substantial contribution to it if they had the essential factors making for confidence, namely, that the Government will deal with imports of dairy products and other commodities and give them a reasonable price for their produce?
§ Mr. Shore
As the hon. Gentleman knows, we expect a considerable contribution from agriculture during the period covered by the assessment. My right hon. Friend the Minister of Agriculture has put to the House our proposals for an import saving contribution from this industry alone of about £160 million a year.
§ Mr. Milne
Is my right hon. Friend aware that the rate of growth mentioned in his statement will cause disappointment to people in the development districts who expect an early reduction in unemployment? Will he look into the matter very closely, because it concerns not only the question of unemployment, 1731 but the task which he has set himself, of achieving an export surplus in the years ahead? Those two things simply do not go together.
I should have thought that my hon. Friend, with his knowledge of past events, would accept that the rate of increase in activity and the decline in employment in development areas are by no means closely related simply to the growth of the G.N.P. itself. Part of the purpose of the policies which we have pursued in the last four years is to give an above average rate of growth to the development areas, even during a period when the rate of national growth has been slew.
§ Mr. Lubbock
Is the right hon. Gentleman aware that the consultations which are proposed with industry are a great improvement on the cut-and-dried National Plan, but why are they to take place merely with selected industries? Will he say whether the economic assessment will be updated, or is this another one-off exercise of the National Plan type which will be swept under the carpet if it does not work? Has the right hon. Gentleman thought of referring this matter to a Select Committee on economic affairs so that hon. Members may have an opportunity to participate in the performance of the Government in meeting their targets?
§ Mr. Shore
I am not sure what the hon. Gentleman has in mind in the last part of that supplementary question, when he refers to a Select Committee on economic affairs.
To answer his question about the range of industries which are mentioned in the last chapter of the document and with which the Government will be having specially close consultations, we arrived at this group partly as a result of our analysis of what looked like the most important sectors of industry in terms of expert performance, and partly as a result of discussions in the N.E.D.C. as an agreed programme. However, I would not like the hon. Gentleman to think that other industries, and other E.D.C.s, are being left out, because they are not.
To answer his question about updating, we must wait for the initial reaction of the E.D.C.s to the document, but I assure him that we have in mind the need for 1732 further revisions and a roll forward on a regular basis.
§ Mr. Orme
Is my right hon. Friend aware that in advocating a £500 million surplus and a 3¼ per cent. growth rate he has appeared to put this document within the Treasury's stranglehold? Where has the competitiveness between the D.E.A. and the Treasury, which was originally supposed to exist, gone? Allowing for this framework, will not this compound unemployment at its present rate, particularly since this rate of growth is only half that advocated by the T.U.C.? What are the views of the T.U.C. on this aspect?
§ Mr. Shore
The important point is to face the real world, the real situation and and our need to repay our substantial debts at a high rate. I do not accept—although I assure my hon. Friend that I know that this is worrying him very much—what I understand to be his fear that the rate of growth which we have put forward and the rate of export surplus which we have set ourselves is incompatible with a falling level of unemployment. During the last few months we have already experienced a very welcome fall in unemployment and, as he will know, there are many "bullish" signs in the economy In the right places, such as investment and exports.
§ Mr. Ian Lloyd
Since the right hon. Gentleman has indicated that the Government will count themselves fortunate to achieve a surplus of £300 million a year, does that mean that the Government now expect that it will take about 10 years for the indebtedness which the country has incurred during the period of Labour Administration to be paid off?
§ Mr. Shore
The hon. Gentleman has a poor memory. About one-half of the £2,000 million debt about which we are talking was incurred in 1963–64. I also wish to correct the point he made about these figures. I did not speak of £300 million as being an overall balance of payments surplus. I spoke of it as being a visible trade surplus, with £500 million as the overall balance of payments surplus.
§ Mr. James Hamilton
Is my right hon. Friend sure that his priorities in this assessment are correct, particularly in regard to the emphasis which he has 1733 placed on the balance of payments? is he also sure that, in the operation of this plan, he will have the C.B.I. and T.U.C. with him?
§ Mr. Shore
I am certain that we must give overriding importance and priority to getting the balance of payments right and achieving the surplus which we have indicated in the document. We have, of course, already had discussions with both the C.B.I. and the T.U.C. Obviously, the T.U.C. as it made clear in its Economic Review, would wish us to go for a higher rate of growth than the one we have put forward. However, as we have indicated to the T.U.C. on many occasions, we do not believe that such a rate of growth would be consistent with an export-led boom; and we cannot have a domestic-led boom because that would lead us once again into balance of payments difficulties.
§ Mr. McMaster
Leaving aside the present minor political difficulties in Northern Ireland, will the right hon. Gentleman ensure that this rate of growth will enable the Government to continue to assist the Government of Northern Ireland? Is he aware that the large number of people unemployed in Northern Ireland—the figure is 8 per cent. and is, unfortunately, rising—could, if provided with employment, help in the national interest?
§ Mr. Bagier
Is my right hon. Friend aware that the important question of unemployment is not merely a statistical one, but a human one? Is he further aware that the North-East in general, and my constituency in particular, is having more than its fair share of unemployment? Does he see in this policy statement a move which will result in the unemployment of this area taking part in assisting to increase the prosperity of the country? Will these policies make a big inroad into the tragic unemployment problem which we now face?
§ Mr. Shore
The document pledges that we shall go ahead with a strong regional policy during the period covered by the assessment. I have no doubt that this will make a substantial contribution to easing the problem of unemployment in the development areas.
As for the Northern Region, about which my hon. Friend was speaking, there has been a specially difficult problem during the past year as a result of the high run-down of the coal industry. That run-down will continue, but I am glad to say that it will not be at a rate as high as that experienced during the past year.
§ Several Hon. Members rose——