HC Deb 29 January 1981 vol 997 cc1061-3
5. Mr. Winnick

asked the Chancellor of the Exchequer when he now expects to see a substantial improvement in the economy.

11. Mr. Dormand

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

Sir Geoffrey Howe

Inflation has been substantially reduced and there are excellent prospects for a further sharp decline. This is the key to sustainable recovery. There are indications that the fall in output may be coming to an end.

Mr. Winnick

Is the Chancellor of the Exchequer aware that that, as usual, was a farcical answer? With unemployment at the highest level since the 1930s, with never-ending redundancies, closures and bankruptcies, with declining business investment, and manufacturing industry constantly being undermined, would the right hon. and learned Gentleman say that he has been a successful Chancellor?

Sir Geoffrey Howe

The hon. Gentleman's question bordered on farce. We came into office at a time of mounting world recession and rapidly-growing inflation rates, and after a period during which unemployment had been mounting higher and higher. Unless the House understands that the way in which to address ourselves to unemployment is to address ourselves to what the Government are doing about the reduction of inflation, it does not understand the first premise. It is crucial that those who are engaged in pay bargaining should continue to recognise the part that way they can play in agreeing to moderate pay settlements as the best way to protect the prospects of jobs.

Mr. Rippon

Does my right hon. and learned Friend agree that there is no hope of the investment-led economic recovery that we need while minimum lending rate remains at its present level? What is the intellectual case for any further issue of long-dated Government stocks at present interest rates, which assume double-figure inflation for years to come, and are adding enormously to the public sector borrowing requirements?

Sir Geoffrey Howe

The case for the continued issue of gilts of that form is that this is one of the methods that have been sensibly and conventionally adopted for covering the Government's borrowing requirement. My right hon. and learned Friend is right to express his continued concern over the level of interest rates. That is one reason why effective control of the size and volume of public spending and public borrowing is so important.

Mr. Richard Wainwright

When will the Chancellor of the Exchequer recognise the growing damage to our economy that is caused by the severe decline of profitable exporting? When will he take steps to discourage the inflow of foreign capital, which serves to increase the exaggerated value of the pound on the international exchanges?

Sir Geoffrey Howe

The hon. Gentleman's question about the inflow of capital has arisen many times in the House. Experience in other countries, as well as ours, shows that it is not possible or sensible to try to stem flows of that sort in any of the ways so far suggested. The hon. Gentleman must also remember that the dominant cause in the decline of competitiveness has been the rising level of unit costs in this country over many years. By lowering that rate of increase of unit costs—this is the importance of sensible pay settlements—we can most effectively and surely offer the prospect of maintaining our position in export markets.

Dr. Mawhinney

Does my right hon. and learned Friend agree that a substantial improvement in the economy will be inhibited unless small firms have greater access to risk capital from the banks than they have at present?

Sir Geoffrey Howe

I join my right hon. Friend the Financial Secretary in endorsing the importance of small firms, and in particular the part that they can play in creating new employment. One of the factors that they regard as important is that to which my right hon. Friend has drawn attention, and it is one of the factors that we have in mind.

Mr. Shore

On the question of a substantial improvement in the economy, is the Chancellor of the Exchequer aware that unemployment is now running at over 2.4 million and that manufacturing output is down by about 15 per cent. since he took over? Has he seen the latest CBI survey, which predicts that profits in manufacturing industry will be lower this year than ever before and that that will continue through 1981? If he cannot give a precise view about when matters will improve substantially, can he say when he expects output in Britain to reach the level that he inherited in May 1979?

Sir Geoffrey Howe

The right hon. Gentleman has not read the CBI survey thoroughly or effectively. It also states that the number of firms expecting an increase in unit costs is the lowest ever, which is a continuing improvement. The proportion of firms expecting an improvement in their prospects for new orders and in the volume of output and export orders has increased. Those factors are substantial and encouraging.

Mr. Shore

rose—

Mr. Speaker

Order. It would be unfair for me to keep calling Front Bench speakers for two questions and not to do the same for Back Benchers.