Confederation of British Industry (Hansard, 19 November 1981)

§ 9. Mr. David Atkinson
asked the Chancellor of the Exchequer if he intends to meet the leaders of the Confederation of British Industry to discuss with them their appreciation of the economy.

§ Sir Geoffrey Howe
I meet the leaders of the CBI regularly as well as at meetings of the National Economic Development Council. I expect to see them at least twice before the Christmas holidays.

§ Mr. Atkinson
Does my right hon. and learned Friend recall the CBI's voluntary prices initiative of about 10 years ago, whereby 200 of our largest firms agreed to keep down price increases by 5 per cent. or less, which resulted in a halving of inflation during the following 12 months? Will my right hon. and learned Friend seek a similar initiative on the part of the CBI and the nationalised industries, given that he is introducing a 5 per cent. guideline for public sector pay?

§ Sir Geoffrey Howe
My hon. Friend's last point was inaccurate, because the limit figure for the growth of pay in the public service sector is 4 per cent., not 5 per cent. I understand my hon. Friend's concern about the need to secure a continued reduction in price inflation. However, I do not think it wise to set about that by seeking such an all-embracing and rigid undertaking. In the years since such an attempt was last made, profitability has fallen very sharply. In the public sector, as in the private sector, it is important that every effort is made to continue to secure a reduction in unit labour costs. I am glad to say that we are making progress in that direction.

§ Mr. Woolmer
If the Government manage to achieve the increase in productivity that they say they will achieve—and with the increase of ½ million in the labour force by 1984—is it not likely that unemployment will continue to rise in the next three or four years towards the figure of 4 million? Why did the right hon. and learned Gentleman and his colleagues reject the advice of the right hon. Member for Chesham and Amersham (Sir I. Gilmour), whose policies would reduce unemployment by 1 million, instead of increasing it by 1 million? When will the right hon. and learned Gentleman give an answer to the right hon. Member for Chesham and Amersham, who has today asked when and why unemployment will fall?

§ Sir Geoffrey Howe
My right hon. and learned Friend the Financial Secretary gave a very effective answer to my right hon. Friend the Member for Chesham and Amersham in the speech that he made last Friday. No doubt the debate will continue elsewhere, as well as in the House. Progress in the right direction on unemployment depends not only on continued good sense about pay bargaining and the reduction of costs, but on willingness to see profits expand, on the tax changes that we have been making since coming into office to improve the prospects of further investment, and on the enterprise of British industry.

§ Mr. Cyril D. Townsend
As many lean, efficient and well-managed companies have been pushed over the cliff, and as we fear the social consequences of unemployment being over 3 million, is there not a clear commonsense case for my right hon. and learned Friend to support the provision of Government funds for carefully costed capital projects in labour-intensive industries?

§ Sir Geoffrey Howe
As my hon. Friend well understands, the Government are perfectly prepared to make funds available within the limit of the total amount of money that is available for investment, rather than current consumption. It is because so much is being taken in current consumption and so little in investment that we must reverse that trend. We have provided plans for an increase in nationalised industry investment of 15 per cent. in real terms next year. That is a larger figure than for any year since 1975. If we have continued success in reducing current costs there will be scope for going further in that direction.