Economic Policy (Hansard, 30 July 1981)

§ 4. Mr. Cryer
asked the Chancellor of the Exchequer what he considers to be the main benefits so far achieved by his policies.

§ The Chancellor of the Exchequer (Sir Geoffrey Howe)
Inflation has been substantially reduced. This is an essential prerequisite to sustainable recovery. There are now indications that productivity is increasing.

§ Mr. Cryer
Does the right hon. and learned Gentleman recall the right hon. Member for Sidcup (Mr. Heath) saying only a short time ago that no discernible benefits were to be seen from the Government's incomprehensible 1148 policies? If the Government's policies are so successful, will the right hon. and learned Gentleman explain why it was necessary to introduce £500 million worth of crisis economic measures last Monday?

§ Sir Geoffrey Howe
I am astonished that the hon. Gentleman should describe the measures announced last Monday by my right hon. Friend the Prime Minister as crisis economic measures. They were directed to the needs of the situation within the context of the Government's economic policy. I would expect the hon. Gentleman to pay more attention to the results of the CBI survey on business outlook published this morning. That shows greater optimism about the business situation generally, the volume of new orders, the volume of output, export prospects, export orders and export deliveries. Every relevant indicator in the survey is now positive and, in each case, the improvement has been sustained for the last 12 months.

§ Mr. McCrindle
Is not my right hon. and learned Friend being unduly modest in assessing the benefits of his economic policies? Does he agree that one of the principal benefits is the greater sense of realism prevailing in British industry which has led to higher productivity, lower wage settlements and fewer strikes?

§ Sir Geoffrey Howe
It has led to all those benefits, as well as to those which I have just listed. Moreover, the number of firms expecting to destock has fallen, as has the number of firms working below capacity. I repeat that greater optimism is reflected in all the relevant indicators and is recorded as having taken place and improved throughout the past 12 months.

§ Mr. Cook
Has the right hon. and learned Gentleman seen the "CBI Industrial Trends Survey"? If so, has he not noted that every one of the indicators to which he referred has fallen since the last quarter and that the only way in which he can detect some improvement is in the fact that they have not fallen as much as they did in the record drop of last quarter? Is he aware that this is the eighth consecutive "CBI Industrial Trends Survey" since he took office and the eighth consecutive survey to show a further fall in output since the last one? When will he recognise the evidence from the real world that the economic consequences of his policies have been disastrous?

§ Sir Geoffrey Howe
The hon. Gentleman must be looking at a totally distorted picture of what is happening. Taking the CBI figures, one finds, for example, that optimism about export prospects was at an all-time negative high in July 1980 and that in each quarter since then the figure has been moving in the right direction, so that this quarter there is a substantial positive balance recording optimism on export prospects, orders and deliveries. Those are the facts as recorded in the survey. They are consistent with the fact that we are now at the end of the recession.

§ Mr. Dorrell
Is my right hon. and learned Friend aware that all the economic forecasts show that the public sector borrowing requirement in the current financial year is likely to be significantly smaller than it was in the last financial year and that, welcome as that is, given that output is hardly rising strongly at the moment, it does not support the case for a further round of fiscal deflation?

§ Sir Geoffrey Howe
No more does it support the case for a further round of fiscal reflation. As my hon. and 1149 learned Friend the Minister of State pointed out, the size of the PSBR is one of the main determinants of the level of interest rates. It is important to have that influence working in the right direction.

§ Mr. Ioan Evans
During the recess, will the right hon. and learned Gentleman assess the consequences of his economic policies? He has increased direct taxation and indirect taxation and made massive cuts in public expenditure. Living standards have come down. Yet the right hon. and learned Gentleman's policies are leading to more than 3 million unemployed. That is the result of his policies.

§ Sir Geoffrey Howe
One important feature for people to understand, which is not implicit in what the hon. Gentleman says, is that throughout the past three years there has been a substantial increase in personal living standards at the same time as there has been a significant fall in the income and profitability of companies. We need to see a sustained reduction in the share of national output going to inflation and a sustained growth in the share of national output going to real growth in output, to real profitability and to more investment.