Growth (Hansard, 25 October 1973)

§ 8. Mr. Knox
asked the Chancellor of the Exchequer what is his latest estimate of the rate of growth.

§ Mr. Barber
The growth of the economy is in line with the Budget forecast of 5 per cent. per annum over the 18 months to the first half of 1974, with some slowing down in the later part of the period.

§ Mr. Knox
My right hon. Friend referred to the economy beginning to slow down in the later part of the period. Has not the time come to introduce measures to ensure a rate of growth in the next two years as high as it has been in the last two years?

§ Mr. Barber
My hon. Friend has always been a great supporter of the growth policy that we have been pursuing and I am grateful to him for that. [Interruption.] I do not expect much support from the Labour benches after that party's record in Government. However, once the margin of spare capacity in the economy has been taken up it is neither feasible nor wise for economic growth to continue at a pace significantly different from the rate of growth of productive potential. It was always our intention that it should be that way, and the evidence suggests that we are being successful in making the transition to a more moderate and sustainable rate of growth, which we expect to continue during 1974.

§ Mr. Sheldon
In his Budget statement the Chancellor said that looking ahead over the next year or so he believed the rate of growth would be around 5 per cent. To the bankers, a few days ago, however, he said that he was moving on to the second stage of his policy, which implied a growth of somewhat less than 3½ per cent. What has happened to the Chancellor's Budget strategy?

§ Mr. Barber
What I said, and what was clearly laid down in the Budget report, was that over the 18-months' period—

§ Mr. Sheldon
The right hon. Gentleman said over the next year or so.

§ Mr. Barber
— to the first half of 1974 we would aim at a rate of growth of 5 per cent., and it looks as though we shall achieve that, just as we achieved a 5 per cent. rate of growth over the previous 18-months' period, which I outlined in the previous Budget. It was always contemplated that the rate of 1458 growth would be higher in the early part of that period and lower during the later part.

§ Mr. Ridsdale
In those areas where there is a high rate of employment will my right hon. Friend consider the abolition of the earnings rule?

§ Mr. Barber
That is a much wider question.

§ Mr. Dell
Is it essential to this rate of growth to run a vast Budget deficit even with an under-valued pound?

§ Mr. Barber
Of course, it would be possible to take the sort of action which some people have contemplated, but which I do not subscribe to, which would have a depressing effect on the economy. I do not think that is necessary.

§ Mr. Gurden
In view of the complete success of the Government's policy for full employment, does my right hon. Friend think the slowdown will come rather sooner?

§ Mr. Barber
No, the course of the economy and the growth rate is broadly as we anticipated in the Budget.

§ Mr. Healey
Has the Chancellor not just confirmed that we have been saying for a long time, namely that the spurt in growth over the last 12 months consisted entirely in taking up slack created by I million unemployed, which was the result of the Chancellor's first two years in office? How can he justify a borrowing requirement of £4,000 million in a year when growth has sunk back to the post-war average?

§ Mr. Barber
I must tell the right hon. Gentleman two things. First, I am confident that the policy that we are pursuing will lead to the sort of growth rate that was referred to in the White Paper on stage 3, which is substantially higher than what was achieved by the Labour Government, when I believe the average growth rate was less than 2 per cent. over their six years in office. I am astonished to hear that the right hon. Gentleman, of all people, after his Blackpool speech, has the audacity to talk about the borrowing requirement. I recently appointed a new Chairman of the Board of the Inland Revenue. But for that I should certainly have considered the right hon. Gentleman as being the best and most zealous tax collector of all time.