Economic Policies (Hansard, 6 November 1980)

§ 5. Mr. Dormand
asked the Chancellor of the Exchequer if he is satisfied with the progress of the Government's economic policies.

§ 9. Mr. Winnick
asked the Chancellor of the Exchequer if he is satisfied with the progress of his economic policies.

§ Sir Geoffrey Howe
Inflation is now falling and this will help to restore confidence and lay the foundation for a stronger economy in future.

§ Mr. Dormand
The right hon. and learned Gentleman will agree that the fundamental point of his policy is the control of the money supply. Will he confirm this week's news that the money supply has increased by 2 per cent. up to 15 October? Will he go further and admit that there are some factors quite outside his control which affect the money supply considerably? In those circumstances, is it not nonsense to place so much emphasis on the money supply itself? Will he change his policies before it is too late?

§ Sir G. Howe
No, Sir. In continuing to emphasise the importance of monetary policy for the conquest of inflation, I am echoing precisely the policies followed by my predecessor. It is one of the points on which he was absolutely clear and explicit on a number of occasions, and quite rightly. The achievement of proper control of the money supply is essential for the conquest of inflation.

§ Mr. Winnick
Is the Chancellor aware that over 2 million unemployed and the very many on short-time working on both sides of industry, as indicated by the CBI and the TUC, are certainly not satisfied with the progress of the economy? Is the Chancellor also aware that if other Conservative Members of Parliament spoke up like the right hon. Member for Sidcup (Mr. Heath) and criticised the disastrous policies of the Chancellor's administration, they would be putting loyalty to the country before loyalty to the Prime Minister?

§ Sir G. Howe
I do not know about loyalty to any particular individual I 1445 know about the importance of loyalty to the achievement of policies that are consistent and necessary for the country. The most important of those objectives is the reduction of inflation. Like any other hon. Member of this House, I am concerned about the level of unemployment. But one must remember that the level of unemployment is high and rising in many other countries, and that other countries beside our own are affected by present world recessionary conditions. As Opposition Members often emphasise, it is not possible to set about conquering unemployment if one turns back from an effective policy to beat inflation.

§ Mr. Anthony Grant
Does my right hon. and learned Friend agree that one of the objectives of Government economic policy is to encourage the purchase of British goods and British services? With that in mind, can he say when we shall have an announcement to the effect that, in order to set an example in that respect. the Inland Revenue computer contract will be given to ICL?

§ Sir G. Howe
That is not a question arising out of the question that I have just been posed. Questions about that topic are already on the Order Paper for answer today. In that and in every other respect, we attach importance to an enlightened and effective public sector purchasing policy, giving preference to British goods where that is compatible with the standards already enunciated.

§ Mr. Healey
Does the Chancellor accept that the recent fall in the annual rate of inflation cannot be due to the success of his monetary policy, since he admitted yesterday that he has overshot by a factor of more than 100 per cent. the target which he set himself? Does not the Chancellor agree that that is due to the excessive level of the pound? Does he share the view of Mr. Frank Cassell, given to the Select Committee in July, that if the pound were at a level at which it was not crucifying British industry, inflation would be over 20 per cent. now?

§ Sir G. Howe
I cannot accept any linkages of that kind. Of course it is clear that one of the factors that has contributed to the lower rate of inflation—we should not overlook this—is the present level of the £ sterling. It is equally clear—one should not gainsay this—that the 1446 importance of monetary policy as part of the policy against inflation cannot be unsaid.

§ Mr. Body
Will my right hon. and learned Friend assure the House that he will not be satisfied with economic policies until he has succeeded in balancing the budget so that revenue matches expenditure? Will he therefore tell his Cabinet colleagues who oppose any spending cuts that the only honourable course for them to take is to stump the country and argue for a higher rate of taxation?

§ Sir G. Howe
I am grateful to my hon. Friend for his support. The Government's view on the importance of securing effective control over borrowing and spending has been set out in the medium-term financial strategy, which was published at the time of the Budget. My hon. Friend will see the importance that we attach to progress in that direction. That is why effective control over public spending is so crucial to the control of interest rates and inflation.

§ Mr. Richard Wainwright
As the Government's targets for the growth in money supply have now lost any credibility as a firm and precise guide to those involved in pay bargaining, what will the right hon. and learned Gentleman put in their place to guide those now involved in pay negotiations?

§ Sir G. Howe
I do not accept the hon. Gentleman's premise. Monetary targets remain important. It is equally clear that there are a thousand reasons why those concerned with pay bargaining should achieve settlements that are compatible with what employers and the nation can afford, and that are also compatible with preventing any further increase in unemployment. It is crucial to underline the link between unemployment and pay bargaining.