HC Deb 24 November 1983 vol 49 cc441-4
4. Mr. Ashley

asked the Chancellor of the Exchequer what further signs there are of recovery from the recession.

Mr. Peter Rees

In the first half of this year gross domestic product was around 5 per cent. higher than at its trough in the first half of 1981. The Industry Act forecast published on 17 November puts growth of GDP at 3 per cent. for both 1983 and 1984.

Mr. Ashley

Can the Minister clear up some confusion that has arisen over the Chancellor's statement on taxation? Does he still believe that tax cuts are necessary to lead to economic growth? Is it not obvious that we need economic growth before we can have tax cuts?

Mr. Rees

As my right hon. Friend made clear, we have achieved economic growth without overall tax cuts, although there have been fairly considerable tax cuts in direct taxation. For a variety of economic and philosophical reasons, we believe it desirable that there should be overall tax cuts during the lifetime of this Parliament.

Mr. Budgen

Is not the Government's most urgent priority to find room to reduce taxation on those who earn less than the average wage?

Mr. Rees

I have made it clear—as has my right hon. Friend—that when my right hon. Friend is in a position to reduce direct taxation, an increase in income tax thresholds will be our highest priority.

Mr. Willie W. Hamilton

Does the Minister agree with the First Lord of the Treasury that the number of people in employment is increasing?

Mr. Rees

Yes, I do, and I should like to draw the attention of the House to the fact that there were 167,000 unfilled vacancies at the last count.

Mr. Forman

As continued economic recovery depends critically on export-led recovery, according to the autumn statement forecasts, what further steps does my right hon. and learned Friend intend to take to boost our export performance?

Mr. Rees

Perhaps it would be better for my right hon. Friend the Secretary of State for Trade and Industry to outline the direct steps. All the measures that the Government have taken on the economy have been designed to allow more leeway for the private sector and to increase its competitive performance. The results have been seen in the remarkable surpluses on current account that have been achieved over the past few years.

Mr. James Hamilton

If the right hon. and learned Gentleman does not pay attention to us, will he pay attention to the chairman of the CBI, who issued a stern warning this morning about an increase in taxation and the possible increases in electricity and gas charges? Will the Minister recognise that the 3 per cent. growth that he talks about is nonsense when it comes to Scotland, where although we do not have record redundancies we have many companies going into receivership? Does that show any signs of a 3 per cent. growth, or any light at the end of the tunnel?

Mr. Rees

I am sure that Scotland is not a special case. Indeed, over the past decade Scotland has benefited from the dramatic exploitation of North sea oil. I am glad that the hon. Gentleman attaches so much importance to cuts in taxation. As a consequence, he will no doubt support the measures that we take to curb public expenditure, which alone can make cuts in taxation possible.

5. Mr. Nelson

asked the Chancellor of the Exchequer what is his latest forecast of economic growth during 1983.

Mr. Lawson

As last week's autumn statement disclosed, we are now forecasting GDP growth of around 3 per cent. between 1982 and 1983. A similar growth rate is envisaged in 1984.

Mr. Nelson

Does my right hon. Friend agree that an essential precondition for higher rates of economic growth, and one totally ignored by the National Institute of Economic and Social Research, is much lower real interest rates? As the Treasury is predicting a fall in inflation next year, can we now look forward to significantly lower interest rates?

Mr. Lawson

I share the importance that my hon. Friend attaches to the level of interest rates. Indeed, that is one reason why we are determined to keep the public sector borrowing requirement firmly under control and as a declining proportion of GDP. That is the only sure way to bring down interest rates.

Mr. Maxton

The Chancellor has said that the recovery has to be export led. Does he agree that that demands that civil engineering and engineering companies, which are major exporters, are supported by a large amount of public investment in the home economy to provide them with the home base which they need to compete successfully abroad?

Mr. Lawson

Over the past few years British civil engineering companies have done particularly well in the export markets, and I commend them for that. What is important for them is the strength of the world recovery, and that is now coming through quite strongly. Indeed, one reason why we hope for a much better export performance next year is that it looks as though world trade will rise by about 5 per cent., whereas this year there has been a 1 per cent. fall in world trade.

Mr. Marlow

Although my right hon. Friend is a mild man, will he take aggressive action to cut out waste and empire building in the Health Service and in local authorities, so that resources can be released to industry for yet more economic growth?

Mr. Lawson

A great deal has been done to root out waste and extravagance in the public service, but there is always scope for much more to be done. My right hon. Friend the Secretary of State for Social Services is at this very moment dealing vigorously with the problem in the National Health Service.

Mr. Wrigglesworth

If the Chancellor of the Exchequer wants economic growth to be sustained over a period of years, will he not need to reverse the decline in capital investment from the public purse that has taken place since the Government came to office? Will he accept the advice of Sir Ian MacGregor and start investing in capital assets in the country, so that we can have sustained economic growth for some years to come?

Mr. Lawson

I think that the hon. Gentleman is referring to Mr. Ian MacGregor, whom I greatly respect. It is arguable that the coal industry, of which Mr. MacGregor is now the distinguished head, has achieved substantially more capital investment than any comparable industry in the private sector would have received. Investment and the difference between capital and current expenditure in the public sector are of considerable importance, and if I am fortunate enough to catch your eye, Mr. Speaker, I hope to advert to that in the debate that follows Question Time.