§ 3. Mr. Beaumont-Darkasked the Chancellor of the Exchequer what contribution domestic demand has made to economic recovery since the first half of 1981.
§ The Chancellor of the Exchequer (Mr. Nigel Lawson)Over the two years from the first half of 1981 to the first half of 1983, the economy has grown by 5 per cent. With world trade declining over this period, that has been entirely due to a sharp recovery in domestic demand.
§ Mr. Beaumont-DarkDoes my right hon. Friend accept that everyone will welcome that growth in domestic demand? Does he agree that, to keep that domestic demand fuelled, we need lower taxation? Will not any talk of increased taxation act like frost on tender plants and kill off the vitally needed growth in the economy?
§ Mr. LawsonMost of all we need a sound fiscal and monetary policy that will lead to downward pressure on 441 interest rates and continued low, and if possible lower, inflation. Low inflation has produced the recovery to date. The Government are, of course, determined to reduce taxation during the lifetime of this Parliament.
§ Mr. WainwrightIs the Chancellor aware that the current domestic demand in relation to the capital goods and civil engineering industries is so dangerously low that it threatens the survival of many skilled and experienced teams of workers and management? Will he at last enable public assets to be maintained and repaired by those skilled industries?
§ Mr. LawsonThe hon. Gentleman is right, in that fortunes fluctuate considerably from industry to industry and from company to company. He may be interested to know that, in the period that I mentioned a moment ago, when total growth was 5 per cent. fixed investment rose by 7 per cent., and that for 1984 we expect an increase in fixed investment of 4 per cent. compared with a growth in the economy as a whole of 3 per cent.
§ Mr. Michael BrownWill my right hon. Friend specify that by the end of this Parliament the net burden of taxation will be less than it is now?
§ Mr. LawsonAs I said a moment ago, it is the Government's firm intention that taxation will be reduced during the lifetime of this Parliament. It will be lower at the end of this Parliament than it is now.
§ Mr. Robert SheldonIs it not clear that the extra spending that we are now seeing is largely a result of the removal of restrictions on hire purchase, and also the reduction in the savings ratio? How long does the right hon. Gentleman expect the effect to continue?
§ Mr. LawsonThe right hon. Gentleman is wrong to attribute any great impetus—although it has had some effect—to the abolition of hire-purchase controls. A much bigger influence is the decline in the savings ratio. That has happened because, with inflation coming down, people need to save less to make sure that the value of their savings is assured. That is one of the direct ways in which falling inflation leads to recovery. The recovery is now spreading through to investments, as I said a moment ago.
§ Mr. StokesDoes my right hon. Friend agree that if recovery is to be maintained it is essential that British manufacturing industry increases its share of the home market.
§ Mr. LawsonYes, of course. As usual, my hon. Friend is right. The fortunes of the economy as a whole depend critically on British industry being efficient both in the home market and overseas.
§ Dr. McDonaldHow will the Chancellor compensate for a drop in domestic demand next April following changes in the housing benefit, which could lead to a drop of 9.6 per cent. in the take-home pay of a single person earning £90 a week, and a drop of 9.3 per cent. in the take-home pay of a married man, with two children under 17, earning £120 a week?
§ Mr. LawsonAs I said earlier, I am confident that there will be a further growth in the economy next year. The Industry Act forecast is of a figure up to 3 per cent., and that takes full account of the changes in housing benefit. Even as a result of the changes, about 6.5 million households will be able to take advantage of that housing benefit scheme.