HC Deb 09 December 1982 vol 33 cc971-2
11. Mr. Dormand

asked the Chancellor of the Exchequer which long-term indicators suggest that the economy is improving.

Mr. Brittan

Evidence of an improvement in the underlying potential of the economy may be seen in the reduction in inflation, greater realism in wage bargaining and lower interest rates than a year ago. Further evidence is provided by continuing high levels of productivity growth.

Mr. Dormand

Does the Chief Secretary recall the forecast made a year ago by the Prime Minister, the Chancellor of the Exchequer and himself about the upturn in the economy? Will the right hon. and learned Gentleman now come clean and admit that this was so much moonshine? Will he say what is the difference between those indicators and the ones that he has now presented to the House? Does he not agree that the time has arrived for a fundamental change in policies and that, despite what has been stated from the Government Dispatch Box today, two essential ingredients in a new policy must be a big increase in public expenditure and a complete re-examination of the value of the pound?

Mr. Brittan

I do not agree with either of the hon. Gentleman's conclusions. I believe that an increase in public spending would inevitably have damaging rather than beneficial consequences. I am proud of the fact that this Government have succeeded, for the first time since 1977, in controlling public expenditure by not increasing it during the course of the review. Next year, it will be going down in real terms. I disagree entirely with the policy of devaluation tendered by the hon. Gentleman. The consequence would be to give another twist to the inflationary spiral and damage the improvement to the underlying potential of the economy.

Mr. Madel

As a profitable motor industry is essential to long-term economic improvement, will my right hon. and learned Friend consider the removal of the unfair 10 per cent. special car tax in the next Budget, which would further help the industry? Is he aware that any loss of revenue will be more than met and made up by increased sales and increased VAT receipts?

Mr. Brittan

Assistance has been given to the motor industry by the removal of hire purchase controls. This has been beneficial. Representations for the further change suggested by my hon. Friend have been made by others. They will be considered carefully.

Mr. Shore

The House has heard a succession of the most contorted, if not "riddle", figures during today's exchanges. Will the Chief Secretary, in addressing himself to forecasts or indicators concerning the future of the economy, reflect upon his statement a few minutes ago that there had been an improvement in competitiveness of about 20 per cent. since, I think, February 1981? Does he not agree that the improvement that has taken place—it has to be set against the background of an earlier deterioration of about 50 per cent.—has been entirely associated with a downward movement of the exchange rate from the absurd height that it had reached?

Mr. Brittan

No. I do not accept that. The vast majority of the percentage increase in competitiveness occurred before there had been any change in the exchange rate. I welcome the opportunity to point out that the right hon. Member for Stepney and Poplar (Mr. Shore) frequently talks about competitiveness but does not tell the House, as I did earlier this afternoon, that, in the period between the fourth quarter of 1976, when his Government were in power and the time when we came to power there was a fall in competitiveness of 28 per cent. compared with a fall of 18 per cent. since then.