HC Deb 23 February 1978 vol 944 cc1679-81
6. Mr. Radice

asked the Chancellor of the Exchequer what is his current estimate of productive potential.

Mr. Joel Barnett

I have no reason to change the view that my right hon. Friend gave on 10th November 1977, that the growth in productive potential is now about 3 per cent. a year, at 1970 prices.

Mr. Radice

Will the Minister explain the curious combination of stagnant output on the one hand and, at the same time, falling unemployment and an increasing number of vacancies?

Mr. Barnett

There is no simple explanation. This proposition has bothered many economists and others. In the past year one would not have expected to see the decline that has occurred in the unemployment figures in the last five months. We are glad of that, but I am sure that my hon. Friend will agree that we should seek to bring down the unemployment level even more.

Mr. Peter Bottomley

If productive capacity is growing by 3.3 per cent. per year, what positive advantage is there in having a level of pay settlements that exceeds that figure?

Mr. Barnett

I cannot see what that has to do with the Question.

Mr. Powell

If the growth of potential is being stated in percentage terms, does it matter what prices it is conceived in?

Mr. Barnett

It just so happened that it seemed the most convenient way to present it.

Mr. MacFarquhar

What likelihood is there of a growth in industrial investment in a period of stagnation in production?

Mr. Barnett

We want to see an increase in productive potential, productivity and growth of output. These are our objectives and will remain so. My right hon. Friend certainly hopes to do something about that in the Budget.

Mr. Lawson

The Chief Secretary may well want to see an increase in the rate of growth and in productive potential—that was the whole point of the industrial strategy—but is he aware that growth of productive potential was higher than 3 per cent. when the Government took office and has gone down since then? Is that not an indictment of the Government's whole industrial strategy?

Mr. Barnett

I do not think so. If the hon. Gentleman looks a little further into what was happening before 1974, he will see that the situation that we inherited was appalling, and he and his hon. Friends presided over that.