HC Deb 20 March 1980 vol 981 cc616-8
1. Mr. Dormand

asked the Chancellor of the Exchequer if he is satisfied with the progress of his economic measures.

The Chancellor of the Exchequer (Sir Geoffrey Howe)

I refer the hon. Member to my answer to him on 21 February.

Mr. Dormand

When will the right hon. and learned Gentleman emerge from his cocoon of fear into the real world to see what effect his policies are having? Will he comment on three aspects of those policies?—[Interruption.]

Mr. Speaker

Order. The hon. Member for Easington (Mr. Dormand) has indicated that his question will be very short.

Mr. Dormand

First, it was said that reduced income tax would galvanise entrepreneurs but there is not even the beginning of any signs of that. Secondly, it is said that the high exchange rate which is playing havoc with our exports is based largely on high interest rates. Thirdly, it is said that oil revenues should be used directly for investment.

Sir G. Howe

The welcome given to the hon. Gentleman's question was so raucous that I was unable to hear his third point. There is a later question on the Order Paper about the exchange rate. As to the impact of lower income tax, I can assure the hon. Gentleman that the prospects for enterprise, success and industrial growth and investment are immensely enhanced by the presence of a Government who had the courage to reduce top income tax rates, which the right hon. Member for Leeds, East (Mr. Healey) always wanted to do but never had the courage to do.

Mr. Hal Miller

Will my right hon. and learned Friend tell the House what progress is being made in reducing the money supply as a result of high interest rates and whether it is private borrowing or Government borrowing that is being reduced?

Sir G. Howe

My hon. Friend will appreciate that Government borrowing has been, is being, and will be substantially reduced as a result of the Government's own measures. He should also know that in the last four months sterling M3 has grown at an annual rate of 10 per cent. That represents a considerable slowing down in the rate of growth which we inherited. Other aggregates, both narrower and wider than sterling M3 are growing no faster than that and sterling M1 has fallen in the last four months. There are, therefore, encouraging signs of progress in re-establishing monetary control.

Mr. Spriggs

When the right hon. and learned Gentleman considers his Budget proposals will he concentrate on finding jobs for school leavers?

Sir G. Howe

My Budget would indeed be narrow if I were to concentrate on that single objective. The creation of conditions in which employment can begin to grow again is one of the objectives behind my Budget proposals.

Mr. Alan Clark

When my right hon. and learned Friend contemplates his economic measures and their progress does he ever reflect, even in the abstract, on our prospects if we were no longer to be a member of the EEC?

Sir G. Howe

The range of my reflections is substantial. Whenever I see my hon. Friend rising to pose a question on occasions such as this I reflect on the topic to which he refers, but that reflection is not at the top of the priorities.

Mr. Horam

If inflation, always and everywhere, is a result of the excess supply of money, why are the Government continually blaming the high level of inflation on wage settlements? Is it not absolutely clear that the principal push to inflation in the last 12 months has been of the Government's own doing, following indirect tax increases and the other costs flowing from the Government's own decisions?

Sir G. Howe

The hon. Gentleman should understand that the impact on inflation by the once-and-for-all change in the tax structure last June is of moderate importance and will fall out of the system next June or July. The hon. Gentleman should also understand that probably the most powerful underlying cause of rising inflation is the high monetary growth rate which we inherited. Certainly, a contributory factor in the short term is a level of pay settlements beyond that which the country can afford. Unless and until pay bargainers, both in the private and public sectors, understand the consequence of unreasonable pay settlements, there will be a high and rising level of unemployment.