HC Deb 08 April 1982 vol 21 cc1075-6
5. Mr Dykes

asked the Chancellor of the Exchequer whether there have been any further indications that the economy is now recovering from the recession.

9. Mr. Winnick

asked the Chancellor of the Exchequer whether there have been further signs that indicate a recovery in the economy.

Sir Geoffrey Howe

Recent additional signs that the economy is recovering include the further improvement in company profits in the final quarter of last year, the recent falls in inflation and interest rates and the much smaller rise in unemployment in recent months. March's CBI and Financial Times business surveys also point to improving business prospects.

Mr. Dykes

If the United States economy goes into a real depression, will that affect the British economy?

Sir Geoffrey Howe

There is undoubtedly a connection between the prosperity of the United States economy and that of every other economy throughout the world, including ours. That is all the more reason for our seeking to follow the right economic policies.

Mr. Winnick

Is the Chancellor aware that the recently published report of the Select Committee on the Treasury and Civil Service forecasts a continuing rise in unemployment and questions the Government's growth targets? Does he agree that that is far more likely to be an accurate forecast than the Government's optimism? Will he explain now, or certainly before the House rises for Easter, what effects he believes the present crisis in the Falkland Islands will have on the economy? If there are to be any repercussions in the shape of public expenditure cuts, will he give an assurance that housing, education and social services will not be hurt further?

Sir Geoffrey Howe

The hon. Gentleman asked about the prospect for the economy. I note that the forecasts made by the Treasury in respect of likely growth and likely inflation are supported by the overwhelming majority of outside independent forecasters.

As for unemployment, I repeat what is in the White Paper. The prospects for unemployment can be improved sharply if we continue to achieve moderation in pay settlements.

Finally, the hon. Gentleman asked about problems arising from the Falkland Islands dispute. I am confident that markets recognise that our determination and ability to pursue the economic strategy that we and they know to be right is in no way affected.

Mr. Hill

My right hon. and learned Friend will be aware that any recovery of the economy after the present recession will be based firmly on low interest charges. Will he give the House his opinion of how interest rates will be moving, say in the next month?

Sir Geoffrey Howe

It is not my practice to make forecasts or predictions of that kind, even for the sake of my hon. Friend, but the strategy embodied in the Budget Statement was designed to produce, as it did produce, lower interest rates and interest rates lower than they would have been otherwise.

Mr. Shore

Since consumer demand undoubtedly has been weakened further during the past year and as a result of the Budget, and since Government expenditure will be contributing nothing to any possible recovery, will the right hon. and learned Gentleman say from what elements in the world economy or in the domestic economy he expects additional demand to derive during the period ahead?

I refer to a rather marvellous new phrase that has entered our economic vocabulary. It came from the Chief Secretary, who spoke last week about the "bounce back" of industrial production. Can the right hon. and learned Gentleman forecast when recovery will be bouncing back to its level in May 1979?

Sir Geoffrey Howe

The right hon. Gentleman should understand that the forecast made by the Treasury at the time of the Budget Statement, supported by outside forecasters, itself represents an improvement on that made in December. The main components there identified for further growth are the growth that will come from continued success in reducing the rate of inflation and also the prospect of some improvement in the world economy. The further factor is the actual, solid improvement by British industry, which is taking place. The right hon. Gentleman might like, for example, to applaud the fact that engineering export orders last year were higher than at any time since figures were first published in 1955.