HC Deb 24 March 1983 vol 39 cc1000-2
2. Mr. Knox

asked the Chancellor of the Exchequer what representations he has received on the effect of his Budget on the recovery of the economy from the recession.

5. Mr. Neubert

asked the Chancellor of the Exchequer if he will make a statement on the representations he has received since his Budget statement.

11. Mr. James Lamond

asked the Chancellor of the Exchequer what representations he has received as to the impact of his Budget proposals on the prospects for the recovery of the economy.

The Chancellor of the Exchequer (Sir Geoffrey Howe)

The Budget has been widely welcomed for its help to business, to people and for recovery and jobs.

Mr. Knox

As my right hon. and learned Friend has for some time expressed confidence that the economy is recovering from the recession, is he not disappointed that there are as yet no signs of a reduction in the number of unemployed? When does he expect that to happen?

Sir Geoffrey Howe

My hon. Friend knows that the Government's policies are directed to securing just such a reduction, but that unemployment is the last of the features of economic activity to respond. I am sure that my hon. Friend will take encouragement from the fact that demand in the United Kingdom has risen by 4.5 per cent. since the spring of 1981, that manufacturing output rose by 3.5 per cent. between November and January, that activity in the construction industry has substantially increased and that there are many other such signs.

Mr. Neubert

Does my right hon. and learned Friend agree that the best tribute that could be paid to the solid, sensible and realistic Budget that he has just introduced is to compare it with the economic crisis in France? The crisis brought the President to the television screen last night to announce drastic new measures after he had spent two years following policies that are constantly being advocated, with increasing fervour, by the Opposition.

Sir Geoffrey Howe

My hon. Friend has made a very impressive point. It is most striking that many of the policies still espoused by the Labour party are being wisely rejected by a Socialist Government in France.

Mr. James Lamond

Given the Chancellor of the Exchequer's strong statements about the Labour party's proposal to devalue the pound if it came to power, does the pound's latest position cause the right hon. and learned Gentleman concern?

Sir Geoffrey Howe

The important feature to remember about the pound and its position in relation to our economic policies is that we have in place policies governing the growth of the money supply, the growth of Government borrowing, and fiscal balance, which are sound and firmly based. It is also worth remembering that although one is sometimes inclined to concentrate on the exchange rate between the pound and the dollar, any inspection of the relationship between the pound and the other currencies in Europe shows that the pound has strengthened very substantially against most of them and has fallen since the inception of the EMS by only 7 per cent. even against the deutschmark, which is the strongest of those currencies.

Mr. Richard Wainwright

Is the Chancellor of the Exchequer not aware that Government borrowing, as a percentage of gross domestic product, has increased over the past two years in all the major European economies—with the exception of ours—and also in the United States of America? The Chancellor's Budget Red Book this year comments on the economies of the rest of the world showing signs of moderate recovery, falling interest rates and falling inflation. Why does not the right hon. and learned Gentleman take a lesson from that for the Government's borrowing requirement?

Sir Geoffrey Howe

The important lesson to be drawn is that my counterpart in France was last week seeking to claim credit for the fact that his public sector deficit was the second largest in the industrial countries, but that this week, for the second time in less than 12 months, he is taking a series of measures to reduce that deficit substantially.

Mr. Beaumont-Dark

Does my right hon. and learned Friend accept that most manufacturing industry accepts that the pound is now at a much more realistic level that will enable our industry to compete? Does he further accept that most people would agree, that he was quite right not to make hasty interventions in the foreign exchange markets, which would only damage this country's financial credibility?

Sir Geoffrey Howe

I take careful note of my hon. Friend's observations and advice.

Mr. Peter Shore

The Chancellor's initial response contained the staggering statement that the Budget had been widely welcomed. Were there any representatives of retirement pensioners or the unemployed among those who widely welcomed it? Given the recent and further devaluation of the pound—in the absence of any price offsetting measures—does not the right hon. and learned Gentleman now think that the figure of 6 per cent. for the rate of inflation at the end of this year should probably be at least 7 per cent? If so, does it not make it even more outrageous that the Chancellor should still stick to his decision to underpay 9 million or more pensioners by giving them a 4 per cent. increase in November of this year?

Sir Geoffrey Howe

There is no reason whatever to take the view offered by the right hon. Gentleman about the prospect of inflation by the end of the year. Pensioners are grateful for the fact that the method for uprating pensions will now be put on a firm basis and will not be dependent on forecasts. They also take note of the fact that under this Government the real value of pensions will have increased by 5 per cent., and that the real value of child benefit will have increased by 12 per cent. The main thrust of the Budget has been warmly and specifically welcomed by all the representatives of British industry. One sign of that welcome is to be seen in the decisions now being taken in relation to future investment in the North Sea.