HC Deb 26 March 1981 vol 1 cc1071-2
14. Mr. Dykes

asked the Chancellor of the Exchequer if he is satisfied with the effects of his Budget announced on 10 March.

Sir Geoffrey Howe

It will be some time before it will be possible to give a considered answer to my hon. Friend's question.

Mr. Dykes

But is there actually any demand pull inflation in the economy at present, and, if so, where?

Sir Geoffrey Howe

Inflation in the economy is due to a range of factors, including past higher money supply growth rates. It is being sustained by the substantial pay increases throughout the economy, following the collapse of the previous Government's pay policy.

Mr. Flannery

Does the right hon. and learned Gentleman accept that unemployment will increase vastly as a result of his Budget? May we assume that he is attempting to balance the books? Does he think that he will be balancing the books if, ultimately, we produce nothing, sell nothing and everybody is out of work?

Sir Geoffrey Howe

That is a curiously unperceptive comment for the hon. Gentleman. It is not true in any respect. From his experience he should know that we shall not begin to achieve growth in employment and in the economy until we have conquered inflation. The prospects are that inflation will continue to come down, which will in due course enable interest rates to come down and create the conditions for exactly the opposite of what the hon. Gentleman fears will take place.

Mr. Marlow

Does my right hon. and learned Friend accept that one indicator of the effects of the Budget, and particularly of industrial confidence, is the Financial Times all-share index? What has happened to that index since the Budget?

Sir Geoffrey Howe

It is one of many indicators of confidence in the consequences of the Budget. Other indicators point in the same direction. One of the most notable, which was commented on earlier this week, is the fact that private housing starts have risen from 6,600 in December to 10,300 in January. The president of the House Builders Federation observed that that offered an optimistic prospect for the year ahead.

Dr. Bray

Does not the right hon. and learned Gentleman's claim that the Budget is not contractionary imply his expectation of a substantial reduction in the exchange rate soon? So what does he intend to do about it?

Sir Geoffrey Howe

It implies no such thing.

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