HC Deb 23 November 1978 vol 958 cc1465-7
12. Mr. Radice

asked the Chancellor of the Exchequer whether he is satisfied with the rate of economic growth.

Mr. Healey

I share the widespread satisfaction with the economic growth rate this year.

Mr. Radice

I thank my right hon. Friend for that answer, but does he agree that the main threats to continued growth are, first, the failure of parts of British industry to respond to the expansion of demand, and, secondly, the possibility of a pay explosion this winter?

Mr. Healey

Yes, Sir, I agree very much. I think that there are two problems. I dealt with the one on the supply side in some areas in a speech which I made at a TUC conference on the industrial strategy last Thursday. It is undoubtedly the case that a pay explosion would hit our hopes of maintaining the current rate of growth in the coming year.

Mr. Watt

Does not the Chancellor of the Exchequer agree that one of the biggest hindrances to economic growth is the high cost of imports? When will the Government bring out a positive policy on import substitution?

Mr. Healey

I am not quite sure what the hon. Member was suggesting. If the cost of imports were rather higher, perhaps we would import fewer of them.

Mr. Ron Thomas

Does not my right hon. Friend agree that the use of emotive language such as "pay explosion" does not help? Does not he agree, further, that Treasury orthodox policies of cutting back demand and making cuts in the standard of living of working people have been one of the major reasons for the lack of economic growth?

Mr. Healey

Whether or not one uses phrases such as "pay explosion", I think that the House would agree—I know that my hon. Friend will—that a position where increases in pay of 30 per cent. which lead to increases in the rate of inflation of 28 per cent. which are accompanied inevitably by increases in taxation thereby leading to a fall in real pay, as the general secretary of the Union of Post Office Workers pointed out was the experience of his own members in 1975, is one to which we do not want to return. I hope that I shall have the support of all my hon. Friends—and in fact, of all hon. Members on both sides of the House—in ensuring that we do not.

Mr. Pardoe

Has the Chancellor of the Exchequer estimated roughly what growth rate he thinks will be required over, say, the next two or three years within OECD to get us back to what he would regard as full employment? Does he see that growth rate taking place?

Mr. Healey

All economists have found it impossible to understand the relationship between employment and growth rates as it has developed over recent years. It is within the memory of the House that most economists have been predicting a very large increase in unemployment in this country over the past 12 months. In fact we have had a fall of more than 107,000, thanks to the policies of Her Majesty's Government which I know have the support of all my hon. Friends, including my hon. Friend the Member for Bolsover (Mr. Skinner).

Mr. Lawson

In the interesting speech to which the right hon. Gentleman referred a moment ago, he will recall that he said that growth would fall off sharply next year, and he attributed this largely to the fact that manufacturing industry would not be as competitive as agriculture, distribution and private sector services. Why is it that the heavily unionised sector of the economy is so much less efficient than the largely non-unionised sector?

Mr. Healey

The hon. Member is talking—I am trying to find a polite word for "tripe"—[An HON. MEMBER: "Balderdash"] Yes, balderdash. As I pointed out in my speech, large sections of manufacturing industry which are heavily unionised have a very high growth rate and compare favourably in growth with other parts of the world. The problem that we have to face is how we raise the performance of the less efficient parts of industry to that of the more efficient parts. The fact that differences of performance can exist on this scale between one sector and another—even in the same sector between one firm and another—suggests that the answer is not to be found in tax regimes, unionisation, welfare States or any of the nostrums peddled so regularly by the Conservative Party.