§ 7. Mr. Dormandasked the Chancellor of the Exchequer if he is satisfied with the progress of the economy; and if he will make a statement.
§ Mr. LawsonThe combination of steady growth and low inflation that we are currently enjoying has not been seen since the 1960s.
§ Mr. DormandIs it not a fact that the economy is already being affected by the dispute in the coal mining industry and that that is likely to cause a rapid deterioration before long? Does the Chancellor not agree that it would therefore be financially and economically advantageous at least to consider, if not to meet, the present demands of the miners—[HON. MEMBERS: "No."]—especially as the other coal-producing countries in the EC receive greater subsidies? Will the right hon. Gentleman make the strongest possible representations to the Prime Minister on this aspect of the economy?
§ Mr. LawsonThe effects on the economy are very slight and will continue to be very slight, largely because of the substantial stocks of coal at the power stations. The 1073 treatment of the miners by the National Coal Board has been very fair—some would even say generous. The levels of pay are high, the increase offered is very generous, and the redundancy terms for those made redundant as a result of pit closures are extremely generous.
The hon. Gentleman referred to coal industries overseas. No other country in Europe is investing anything like as much in its coal industry as we are, and that is important for the future. However, at the same time as investment for the future there must inevitably be closures of aging and grossly uneconomical pits. I am sure that the hon. Gentleman, who knows the industry very well, knows in his heart that that is true.
§ Mr. HigginsAs movements in the United Kingdom monetary aggregates are satisfactory, and as my right hon. Friend has made it quite clear in his evidence to the Select Committee that he has no target for the exchange rate and no intention of acting to protect it against external factors, why does he think interest rates are rising, and what effect does he think this it will have on the economy?
§ Mr. LawsonAs I said, we, any more than any other country, cannot be wholly immune to what is happening to interest rates in the United States if we are concerned to maintain proper control of monetary conditions. I was interested to read that Herr Karl Otto Pùhl; of the German Bundesbank had made a similar remark in London yesterday. As I said in my evidence to the very eminent Select Committee that my right hon. Friend chairs, although we do not have a target for the exchange rate, we take it into account in pursuing our monetary policy.
Mr. James CallaghanWhile thanking the Chancellor for his tribute to my Chancellorship in the 1960s when there was steady growth, high investment and a much higher sterling rate than there is today, may I ask him to take into account the fact that at that time unemployment was at record low levels? Will he accept that he cannot take credit for his Chancellorship until he can do something about the present disastrous unemployment figures?
§ Mr. LawsonI entirely agree with the right hon. Gentleman that unemployment at present is appallingly high, but he is a fair man and knows full well that the rise in unemployment over the past 20 years has occurred throughout the world and not simply in this country. He was referring to the 1960s which was 20 years ago. [Interruption.] I do not know whether Opposition Members can count or not, but I know that the right hon. Gentleman, as a former Chancellor of the Exchequer, can, because he had to for that job.
The rise in unemployment has been worldwide. However, there are signs of an improvement in the labour market and I draw attention, in particular, to the fact that between March and December last year—the most recent period for which figures are available—the numbers in work increased by some 200,000.
§ Mr. EggarIn view of the importance of the United States interest rates to the level of our base rates, what action will my right hon. Friend take in conjunction with other European countries, to try to persuade the United States to reduce its deficit?
§ Mr. LawsonThere have been a number of discussions with the United States authorities about that. There is some 1074 sign of a welcome change in the attitude of the American Government towards their deficit. As my hon. Friend will know, they have now decided to make what they call a downpayment, a $150 billion reduction in the deficit over three years. Their description of it as a downpayment leads to the inference that further reductions are yet to come. The matter may well be discussed at the London summit next month.
§ Mr. Robert SheldonWhy did the Chancellor of the Exchequer, when considering the exchange rate policy which he announced earlier, not ensure that the exchange rates took some of the strain, rather than allowing interest rates to rise, to the disadvantage of industry in general?
§ Mr. LawsonI am sure that if the right hon. Gentleman were ever again a Treasury Minister he would indeed have the satisfaction — to him — of seeing a substantial devaluation of the pound. I should have thought that his experience as a Treasury Minister would have taught him that there is no satisfaction through that route.
§ Mr. YeoDoes my right hon. Friend recall that there has never been a Labour Government who have succeeded in bringing about a reduction in unemployment? Does he agree that it therefore must he a source of considerable comfort to those looking for work that a Conservative Government are in power?
§ Mr. LawsonMy hon. Friend is right. Moreover, there has not been a Labour Government who have not had an average rate of inflation during their term of office higher than the rate of inflation of the preceding Government. This Government have broken that trend. Inflation has come down. The economy is recovering and the employment picture is now gradually improving, although I readily agree that it has a lot further to go.
§ Dr. McDonaldIs the Chancellor aware that industralists do not share his complacency about the rise in interest rates and that yesterday the chairman of the CBI said that the rise in interest rates could shatter the fragile recovery—as he described it—which is taking place this year? When will the Chancellor accept real responsibility for the control of this country's economy? When, instead of constantly blaming America, will he start to control interest rates himself and bring them down so that industry may continue to recover?
§ Mr. LawsonI could be interested to learn how the hon. Lady imagines that she can precisely control interest rates and, indeed, what she thinks the consequences of that would be. The more considered verdict of British industry was that contained in the CBI April survey, which showed the most widespread improvement in manufacturing orders and output for seven years.