HC Deb 17 June 1982 vol 25 cc1067-8
1. Mr. Knox

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

The Chancellor of the Exchequer (Sir Geoffrey Howe)

Activity is higher than in the first half of last year. Industrial profits are beginning to recover. Productivity—output per head—in manufacturing has risen 12 per cent. from the fourth quarter of 1980. The latest CBI economic situation report shows the recovery continuing into 1983. Interest rates have continued the welcome decline seen earlier in the year, and inflation is coming down faster than expected, providing the best possible basis for achieving, and sustaining, continued recovery.

Mr. Knox

Is my right hon. and learned Friend sure that the economy is recovering, rather than just bobbing along the bottom?

Sir Geoffrey Howe

I am confident of that. In addition to the facts that I have just recited to the House, all the forecasts—not just those from my Department—confirm that proposition.

Mr. Richard Wainwright

In the pursuit of economic recovery, when does the Chancellor expect to enable efficient British exporters to get back to the level of cost-competitiveness that they enjoyed when he took office?

Sir Geoffrey Howe

Progress in that direction depends entirely upon the success achieved in reducing unit labour costs and improving competitiveness in British industry. The experience of the previous Government showed that, despite a substantial decline in the value of the pound, that course contributed only insignificantly to the restoration of competitiveness.

Mr. Peter Bottomley

Does my right hon. and learned Friend agree that if National Health Service employees receive a pay increase of 12 per cent., or anything rear that, it will lead to the return of inflation, far greater unemployment, and reduce prospects for economic growth?

Mr. Hoyle


Sir Geoffrey Howe

I entirely agree with my hon. Friend that it is important throughout the economy to continue the progressive reduction in the rate of increase of costs, whether expressed in terms of prices or pay awards.

Mr. Shore

Is the Chancellor aware that many people in the country and in the House will have been astonished by his reply to his hon. Friend the Member for Leek (Mr. Knox)? The Chancellor cited the latest CBI monthly report. Does he agree that the key phrase is that the economy "remains in the doldrums"? That is how it was described in the newspapers at the time. Is the Chancellor aware that the May issue of the index of industrial production showed that production in the economy was ½ per cent. down on the previous quarter? Does the Chancellor agree that this recovery resembles the Scarlet Pimpernel—it is oglimpsed rather than seen and is largely a work of fiction?

Sir Geoffrey Howe

I can imagine that it is a work of fiction which the right hon. Gentleman might like to write. The reality is that the gross domestic product is up significantly since last spring. Production has risen in the last three months by 1 per cent. Productivity and profits have improved on the lines that I have indicated. There are many indicators of steady but sustainable economic growth. I should like to enlist the support of the right hon. Gentleman in seeking to persuade all those concerned with pay bargaining to understand the importance of a continued reduction in unit labour costs if we are to continue progress in that direction.