HC Deb 11 February 1982 vol 17 cc1098-9
3. Mr. Dykes

asked the Chancellor of the Exchequer what prospect for a revival in the economy he foresees for 1982.

Sir Geoffrey Howe

The Industry Act forecast, published in December, envisaged a continuation of the gradual recovery in output which started in 1981. An assessment of economic prospects will be published as usual with the Budget on 9 March.

Mr. Dykes

Can the monetarist experiment be continued in an effort to reduce the rate of inflation below 10 per cent. without a further intolerable rise in the numbers of unemployed?

Sir Geoffrey Howe

My hon. Friend should not talk of a monetarist experiment, because the importance of monetary policy has been fundamental to economic policy management in Britain since the lesson that was imposed on the Labour Administration by the IMF in 1976. It is part of the common understanding of other Governments and Finance Ministers throughout the world. It is important to maintain the proper balance in that policy if we are to sustain progress towards lower inflation and, eventually, towards the recovery of employment.

Mr. Richard Wainwright

At what stage of that tenuous predicted recovery does the Chancellor expect to be affected by the persistent overshoot in the growth of sterling M3?

Sir Geoffrey Howe

The hon. Gentleman knows from his distinguished contribution to the proceedings of the Treasury and Civil Service Select Committee that, as explained in my last Budget speech and before that, sterling M3 is by no means the only monetary aggregate to which we have regard.

Mr. Dorrell

Will my right hon. and learned Friend confirm that the public expenditure package that he presented in November represented half his Budget judgment for the forthcoming year? Will he confirm that the House should remember that that package represented a deflation, on the most conservative estimate, of £1,000 million, and that the Budget must be seen against that background?

Sir Geoffrey Howe

The two halves of my hon. Friend's question are inconsistent. On 2 December I announced the expenditure half, and only that half, of my Budget. It is impossible for even my hon. Friend to judge whether it was deflationary in its effect.

Mr. Shore

The right hon. and learned Gentleman has used the word "revival". When does he expect such a revival to reach the level in either employment or output that Britain enjoyed three years ago before he became Chancellor?

Sir Geoffrey Howe

The right hon. Gentleman knows full well that all countries have been sustaining reductions in their economic activity, not least because of the huge increase in oil prices that took place in 1979. I expect the right hon. Gentleman—it is too much to expect—to welcome the fact that output has been moving in the right direction since the middle of last year.