Economic Recovery

HC Deb 28 April 1983 vol 41 cc988-9

12. Mr. Knox

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

Mr. Brittan

Over recent weeks a number of encouraging indicators have been published, pointing to modest economic recovery. These include evidence that manufacturing production is increasing—up 1 per cent. in the three months to February on the previous three months; the continuing growth in total output, now 2 per cent. higher than in the spring of 1981; and a substantial improvement in business confidence.

Mr. Knox

What effect does my right hon. and learned Friend think the change in the exchange rate of recent months will have on the economy? In particular, what will be its effect on jobs and growth, and how quickyy will it be felt?

Mr. Brittan

It is, I think, impossible to be precise. However, the reduction in the value of the pound since last summer has plainly provided opportunities to British exporters. It would also lead to a risk of inflation if it went further in that direction.

Mr. Joel Barnett

With the Government's present economic policies, how do they expect to sustain even the present modest recovery without an increase in inflation?

Mr. Brittan

I do not believe that the policy that we have followed, of a restraint on monetary growth—which has led to a fall in inflation—will be reversed. Indeed, the right hon. Gentleman should know that the increase in activity that I have described is the result of the success of those policies. If we were to reverse them, the increase in production and output would no longer be continued.

Mr. Richard Wainwright

When will the Chief Secretary give some reassurance to those informed economists who already see the beginning of the next recession, by taking steps with the money supply to reduce the real rate of interest, which is now extravagantly high?

Mr. Brittan

The hon. Gentleman is looking further ahead than he can see.

Mr. Dorrell

Is it not clear to my right hon. and learned Friend that the fluctuations in the exchange rate in the past two years have been a major impediment to the growth of world trade? As this country relies so heavily on an expanding basis of world trade, is it not vitally in our interests to work with our European and North American partners for greater exchange rate stability?

Mr. Brittan

I agree that we should seek to work with our European and American partners and to persuade them — as we have largely been successful in doing — to pursue policies on inflation and budget deficits that will lead to more stability in the exchange rates.

Mr. Cook

If the Chief Secretary is so convinced that a recovery is under way, will he tell us when manufacturing investment will rise by 37 per cent., back to its level in 1979; when manufacturing output will rise by 22 per cent., back to its level in 1979; when bankruptcies will fall by 67 per cent., back to the level in 1979, and when unemployment will fall by 2 million, back to its level in 1979? If he cannot answer that, will he at least spare the House his smug satisfaction at the unique ruin that his policies have brought to British industry?

Mr. Brittan

If the hon. Gentleman is trying to tell us that there has been a recession, he need not take the trouble, because we are well aware of that. However, if he is also trying to say that he finds it—for some reason that wholly eludes me—depressing to see a recovery in economic activity, I must tell him that neither the House nor the country shares his view.