Economic Progress (Hansard, 28 November 1985)

§ 5. Mr. Dubs
asked the Chancellor of the Exchequer which economic indicators confirm his assessment of the progress of the economy.

§ The Chancellor of the Exchequer (Mr. Nigel Lawson)
Inflation is currently 5.4 per cent. and will continue to fall. Growth of national output is likely to be 3½ per cent. this year and is forecast to reach a further 3 per cent. next year. The number of people in work has risen by some 600,000 last year and is expected to go on rising.

§ Mr. Dubs
When will the Chancellor stop deceiving the British public about the economy? Does he not agree that, compared with 1979 when the Conservatives took over, output and employment are down, and the only thing that is up is unemployment?

§ Mr. Lawson
The hon. Gentleman has obviously forgotten that during the earlier period of this Government's office there was the worst world recession since the 1930s. Since then, we have had the strongest recovery that the nation has had since the first oil shock. Living standards are at an all-time record level and so are manufacturing exports and productivity, national output and investment. Those are facts.

§ Mr. Forman
Will my right hon. Friend take the opportunity to spell out to the House and the country the 1003 extent to which the excellent prospects for inflation and improving prospects for employment would be vulnerable to another take off of unit pay costs?

§ Mr. Lawson
My hon. Friend is right. Among the threats to our economic success, one of the biggest is an excessive rise in unit labour costs. As it is, unit labour costs are rising more rapidly than those of our major competitors, some of which have had a slight fall in such costs.

§ Mr. Robert Sheldon
Has the Chancellor seen the latest quarterly survey from the Manchester chamber of commerce and industry? Is he aware that it points out that there will be an especially sharp fall in manufactured exports as a result of the high exchange rate? The Manchester chamber of commerce and industry knows little about monetary matters and other such factors, but it does know something about the state of its members' order books. Will the Chancellor listen to what is happening to industry, rather than listening too closely, as he does, to what is happening in the City of London?

§ Mr. Lawson
I listen closely to the voice of industry and to what the CBI has to say. The right hon. Gentleman will know that the most recent CBI survey showed a further growth in manufacturing exports and manufacturing output in the coming year.

§ Mr. John Browne
Does my right hon. Friend accept that with the entry of the main player—the United States—the group of five's concerted action in the foreign exchange markets was apparently a success? Will he now agree to persuade the United States to lead the group of five again in concerted action, this time to bring down US dollar and other major currency interest rates?

§ Mr. Lawson
My hon. Friend is right in saying that the shift in the United States policy on intervention in the foreign currency markets enabled the Plaza accord in September to be effective. I assure my hon. Friend that the accord is still in being.

§ Mr. Foot
Will the right hon. Gentleman tell us what is the real rate of growth, defined by the right hon. Member for Old Bexley and Sidcup (Mr. Heath) in his speech yesterday, and what he thinks of that real statement to the country?

§ Mr. Lawson
The right hon. Gentleman is correct in that over the period that the Government have been in office the average rate of growth has been slightly less than it was during the time the Labour Government, in which he served, were in office. However, if one leaves out North sea oil, the rate of growth is the same. The rate of growth under this Government has been as great as that under the Labour Government, despite the fact that we have had to undergo the worst world recession since the 1930s. Since that time, we have had the strongest recovery at any time since the first oil shock.

§ Mr. Ralph Howell
May I ask my right hon. Friend to ignore the advice that he has received from ex-Prime Ministers and others and to use all the funds that he can find to raise tax thresholds? Is he aware that it is scandalous that we are taking £5 from the single pensioner with an income of £70 per week and giving over £100 tax free to 16-year-olds who deliberately make themselves homeless?

§ Mr. Lawson
My hon. Friend is right to point to the importance of getting income tax down. The Government have done that and we intend to continue to do so when the opportunity arises. However, it is clear that if, by any mischance, there were to be a Labour Government, income tax would be increased very substantially.

§ Mr. Hattersley
If the Chancellor is as concerned about wage costs as he said a moment ago, why did the Conservative party's most recent party political broadcast boast that during its six years in office wages had risen more quickly than prices?

§ Mr. Lawson
Because they have—very substantially indeed. That is why.