Economic Recovery (Hansard, 27 October 1983)

§ 1. Dr. Godman
asked the Chancellor of the Exchequer what evidence he has of sustained recovery in the economy.

§ 18. Mr. Dubs
asked the Chancellor of the Exchequer what is the evidence of economic recovery.

§ The Chancellor of the Exchequer (Mr. Nigel Lawson)
For the past two years or more GDP has been growing at a rate of 2.5 to 3 per cent. a year. This is the consequence of sound monetary and fiscal policies, which have brought down inflation and interest rates.

§ Dr. Godman
Will the Chancellor of the Exchequer assure the House that unemployed people and those in need will benefit from any hoped-for prosperity, which presumably will accompany the hoped-for economic recovery, particularly by a real increase in benefit levels?

§ Mr. Lawson
The whole nation will stand to benefit from the economic recovery. The level of unemployment is far from satisfactory, but I am sure the hon. Gentleman 410 will be pleased to know that figures for those in work—the total number of employees and the self-employed—for the second quarter of this year showed the first increase since the recession began.

§ Mr. Dubs
Does the Chancellor agree that the output measure is a more reliable indicator than GDP, which he has quoted, and that the output measure shows a much smaller rate of economic growth than the figure that he gave to the House? Is this not an example of the Chancellor juggling with the figures to persuade himself and the country that things are better than they are?

§ Mr. Lawson
On the contrary, it is a matter of regret that the hon. Gentleman should take such delight in trying to show that matters in this country are worse than they are. The figures which I quoted are the average of the output, expenditure and income measures. That is the basis upon which the Central Statistical Office has worked under the present Government, under the Labour Government and for as long as I can remember. It is not true to say that, over the period that I have mentioned, the output measure alone is the best indicator. The average measure is the best.

§ Mr. Beaumont-Dark
Will my right hon. Friend let us know what further ideas he has, so that this genuine recovery in demand is sustained? Will he keep capital expenditure, rather than revenue expenditure, foremost in his mind?

§ Mr. Lawson
Capital expenditure is very important and, happily, is increasing. If my hon. Friend is thinking in particular about public expenditure, I must tell him that it is a matter for my right hon. Friends, who are responsible for their Departments, to determine the priorities in their programmes between current and capital expenditure.

§ Dr. Bray
Does the Chancellor agree that, even on the average estimate, GDP has not yet recovered to the level in 1979 when the Government took office?

§ Mr. Lawson
It has not yet recovered to that level, although it has recovered to be close to that level. As the hon. Gentleman is aware, we have been going through the worst world recession since the 1930s. I am sure that if he is patient he will before long witness output that surpasses the previous highest level.

§ Mr. Silvester
Does my right hon. Friend believe that our economic recovery would be advanced by reducing public expenditure? If so, on what does he base that belief?

§ Mr. Lawson
I base my belief on that which is shared by most, if not all, of my right hon. and hon. Friends, including my hon. Friend the Member for Manchester, Withington (Mr. Silvester). An economy in which there are effective incentives is likely to do better than one in which there are inadequate incentives for earning, risk-taking and so on. To that end it is necessary to reduce the burden of taxation. That can be achieved responsibly only by very firm control of public expenditure.

§ Mr. Shore
On the assumption that the lines of communication between the United States Treasury and Great George street are more open than those between the State Department and the Foreign Office, will the right hon. Gentleman pay some attention to the fact that the rate of growth in the United States is now 8 per cent. per 411 annum, that unemployment is falling and that that happy state of affairs has been brought about simply because the United States Treasury has abandoned precisely the money supply measures and public expenditure restraints which the right hon. Gentleman constantly urges upon us? Does he agree that the real measure of growth is output, as my hon. Friend the Member for Battersea (Mr. Dubs) said? Is he aware that output is rising at a rate of 1.7 per cent. and that we are still 4 per cent. below the level that obtained at the 1979 general election?

§ Mr. Lawson
I understand from reading the newspapers that this might be the right hon. Gentleman's last appearance with his present duties. I have no means of knowing whether that is true, but if it is I should like to say that we shall all greatly miss his old world charm. It is clear that the performance of the American economy is due to its greater resilience and the fact that public expenditure, Government spending and taxation in the United States are a great deal lower than in Britain.