HC Deb 21 June 1979 vol 968 cc1490-2
13. Mr. Richard Wainwright

asked the Chancellor of the Exchequer what, at the present time, is the estimated annual rate of growth of gross domestic product.

Sir Geoffrey Howe

The economic forecast published last week in the Financial Statement and Budget Report suggested that gross domestic product in the first half of 1979 was more than 1 per cent. higher than a year earlier.

Mr. Wainwright

In view of that only modest improvement, and in order that enterprising people may see some light at the end of the tunnel, will the Chancellor say in what year he aims to see a substantial upturn in the rate of growth of gross domestic product?

Sir G. Howe

I am grateful to the hon. Gentleman for his emphasis on the need for enterprising people to see some light at the end of the tunnel, since it must be understood plainly that it is beyond the power of any Government, by expansion or contraction of money supply or demand, to guarantee the delivery of any forecasts of output growth at all. What the Government are seeking to do in the Budget is to change the tax environment, to improve incentives for the enterprising, to whom the hon. Gentleman refers, and to examine and remove regulations and obstructions which stand in the way of enterprise. Only when we secure improvements of that kind in the performance of the supply side of the economy is there any real prospect of expansion of output, prosperity and employment.

Mr. Stoddart

At the Heads of Government meeting now taking place, at which the Prime Minister is in attendance, will the response to the Commission's concern about unemployment and the decline in growth in the EEC countries be to put forward the same ridiculous policies for solving this problem as have been put to the House and the country by this Government?

Sir G. Howe

It is my plain impression from discussions with Finance Ministers in other countries, and it clearly emerged, for example, at the OECD meeting last week, that throughout the world economy attention is focusing increasingly on the need to improve the supply side of the economy. Indeed, the Secretary for the Treasury in the United States, speaking in London last Wednesday, drew attention to the failure in that economy of persistent reliance on short-term demand management as an answer to economic problems and emphasised exactly the same diagnosis and prescription as I gave in my Budget speech the day before.

Mr. Robert Sheldon

But is not the Chancellor aware that one of the most serious consequences of his Budget will be in the investment intentions of manufacturing industry? Since the worrying forecasts that we are now hearing about manufacturing industry's investment intentions give cause for great concern, will the right hon. and learned Gentleman give to industry generally at least the modest assurance that he has no intention whatever of reducing the capital allowances?

Sir G. Howe

The outlook for manufacturing investment depends essentially on the long-term prospect for economic success and prosperity, and depends therefore upon the measures that I announced in the Budget. I made plain also in my Budget Statement that it would be wrong to contemplate any substantial change in the structure of corporate taxation without consultation, and I have no such intention at present.