Economic Prospects (Hansard, 11 November 1982)

§ 10. Mr. Winnick
asked the Chancellor of the Exchequer when he now expects to see a substantial improvement in the economy.

§ 14. Mr. Foster
asked the Chancellor of the Exchequer what are the prospects for the recovery of the economy.

§ Sir Geoffrey Howe
The weakness in world activity this year has held back recovery at home. But the Industry Act forecast published earlier this week looked to growth of ½ per cent. in the domestic economy in 1982 and 1½ per cent. in 1983. Continued success in bringing down inflation and interest rates will provide a sound basis for sustained recovery.

§ Mr. Winnick
Is not recovery as far away as ever and will not unemployment continue to rise substantially? As the Leader of the House yesterday disputed my view that unemployment was the Government's deliberate policy, may I ask the Chancellor whether the devastation and mass unemployment have been caused by stupidity and incompetence rather than intent?

§ Mr. Dickens
Socialism!

§ Sir Geoffrey Howe
The prospects for the economy as a whole remain as I have described them. If the hon. Gentleman chooses to continue to believe that unemployment is the objective of any sensible Government he is less perceptive than I thought.

§ Mr. Foster
Is the Chancellor aware that in the Northern region there is no sign of the recovery that he talks about? Whatever his claims about increased productivity, is not British industry over 30 per cent. less competitive now than when the Government came to power? Is he aware that merely by acting on wages alone he could not restore competitiveness before 1987?

§ Sir Geoffrey Howe
It is precisely because wages are not the only component of competitiveness that the position is not as gloomy as the hon. Gentleman foresees. Competitiveness depends on productivity, unit labour costs, quality, delivery, identifying the market and producing for it. I recognise that some companies and industries are still in difficulties in Britain and throughout the world, but others are managing to improve their performance by concentrating on those factors.

§ Mr. Budgen
What effect will the Government intervening to reduce interest rates have on the money supply? What do they now say is the effect of the money supply on the prospective rate of inflation?

§ Sir Geoffrey Howe
In general terms, and depending on a number of other conditions, lower interest rates will be likely to lead to a faster increase in the rate of growth of the money supply. The Government continue to attach importance, as set out in the medium-term financial strategy, and as I said yesterday, to effective restraint of monetary growth.

§ Mr. Shore
The Chancellor has confirmed that the outlook for unemployment is still appalling and that it is very modest indeed for the economy. His view is that the key to the situation is to improve our competitiveness. Will he now tell us what he refused to tell us yesterday: by how much does he believe wages have to he cut to achieve the competitiveness that we had when the Government came to power three years ago?

§ Sir Geoffrey Howe
The right hon. Gentleman tried to make the same point yesterday. As I told the hon. Member for Bishop Auckland (Mr. Foster), competitiveness depends on a large number of factors other than pay levels—productivity, identification of markets, quality and performance in every way. Even today British companies are succeeding in improving their performance. I invite the right hon. Gentleman to cease focusing in that monocular fashion on one component of competitiveness.

§ Mr. Shore
Among the components, where do wages and salaries rank in the Chancellor's thinking?

§ Sir Geoffrey Howe
It depends on wide variations between industry and industry and company and company and the performance of different firms, as is evident from the fact that there is wide variation even today in performance in the same industries.

§ Mr. Nicholas Winterton
Did not the Minister of State, in reply to an earlier question about textiles and clothing, do a grave disservice to the 600,000-plus employees in the industry when he referred to their level of wages and uncompetitiveness? Will my right hon. and learned Friend accept that unit costs and wages have nothing to do with uncompetitiveness and that the industries are gravely affected by unfair competition? When does he intend to take action about the grotesquely unfair competition, as the Government have promised?

§ Sir Geoffrey Howe
I appreciate that competitive pressures on some industries are much more severe than on others. In many cases they arise from changes in the pattern and balance of world markets for a variety of reasons, so it may or may not be sensible to consider special action. The question is for consideration case by case.