HC Deb 17 April 1986 vol 95 cc996-8
5. Mr. Winnick

asked the Chancellor of the Exchequer if he has yet quantified the expected effect of his Budget on unemployment.

Mr. Ian Stewart

The purpose of the Government's economic policy is to encourage a vigorous and enterprising economy, generating sustained growth of output and employment. The Budget proposals include a considerable number of measures directed to the problems of unemployment.

Mr. Winnick

Despite the way in which the unemployment figures have been fiddled yet again, is it not clear that the true level of unemployment is now more than 4 million? Why does the Minister not state clearly that the Budget will do nothing to end the misery of mass unemployment? That is certainly a reason why the Government will be rejected at the general election. Fulham is just the start.

Mr. Stewart

I disagree with all parts of the hon. Gentleman's question. The dependence of the economy on growth and output for improving employment has been well demonstrated by the figures published yesterday, which show that 1 million new jobs have been created during the past three years. We now have the lowest corporation tax, at 35 per cent., since the war, and the small companies rate is 29 per cent. That is how the private sector can generate the jobs that we need.

Mr. Forman

The Budget obviously contains some sensible measures designed to alleviate unemployment, but is not the more important factor about which the Treasury must be concerned the rise of 5.7 per cent. in unit labour costs last year and of 4.5 per cent. tbhe preceding year? Therefore, we must see some improvement during the coming period.

Mr. Stewart

I absolutely support what my hon. Friend has said. Nothing would do so much to improve the prospects for the expansion of British industry, and the creation of further additional jobs than if our unit costs were to rise at a rate not greater than that of our major competitors.

Mr. Hoyle

Why does the Minister not tell the House that the Budget will do nothing for unemployment? Does he agree that if we are to have a recovery, it must be through industry? Will it not be a great disappointment to industry that interest rates have not decreased today? Is that not a direct result of the free market economy?

Mr. Stewart

The Budget was well received in the financial market, and I am sure that the sound, responsible economic policies that my right hon. Friend the Chancellor of the Exchequer introduced in his Budget are a direct reason why interest rates have been able to fall by 1.5 points since that day.

Mr. Holt

In reflecting on the Budget and unemployment, does my hon. Friend accept that at least one hon. Member is bitterly disappointed? The Treasury did not take up my suggestion to introduce measures to assist with the relocation of labour by taking account of the figure of £8,000, referred to by my hon. Friend the Member for Lewisham, West (Mr. Maples), which if given to an unemployed person in the north to help him relocate in the south, where house prices are out of his reach, would have done much to help unemployment.

Mr. Stewart

The measures in the Budget which apply to the economy as a whole are a better way of devoting limited resources to encourage the expansion of the economy, which is the best way to maintain jobs throughout the country.

Mr. Tony Lloyd

Is the Minister aware that, among those who did not welcome the Budget, were manufacturers in the north of England and elsewhere, who for six years have faced real problems, created by the Government, in increasing production, investment and ultimately employment? What in the Budget will increase output and employment in the manufacturing industries?

Mr. Stewart

The most important factor for manufacturing areas, whether in the north of England or anywhere else, is a reduction in inflation. The reduction in interest rates has already taken place and there is a low rate of corporation tax, so industries can reinvest the profits in additional growth in the future.

Mr. Powley

Does my right hon. Friend agree that many other factors affect the levels of employment and unemployment, besides the welcome measures that were introduced in the Budget? In particular, does he agree that measures such as restrictive practices in commerce and industry, and the introduction of new technology, can affect the level of unemployment? Is it not just as important to pay attention to those measures as to the welcome the measures that were introduced in the Budget?

Mr. Stewart

I note the point that my hon. Friend has made. Several factors inhibit the working of the labour market, and we have done our best to try to reduce them. We have also tailored the specific employment measures in the Budget particularly to deal with the most difficult areas—the young, the long-term unemployed and those who need training. I am sure that they are the right areas on which to concentrate.

Mr. Terry Davis

As the original question refers to the effect of the Budget on unemployment, and as the Treasury must have calculated the effects of the Budget on employment, will the Economic Secretary at least admit that he is simply too ashamed to publish that Treasury forecast? As he referred to the Department of Employment figures published yesterday, will he confirm that those same figures show that unemployment has increased by more than 100,000 during the past year, and that the Department of Employment yesterday—only one month after the Budget—announced a resumption in the upward trend of unemployment?

Mr. Stewart

The hon. Gentleman may have overlooked the fact that the announcement yesterday demonstrated that jobs are rapidly being created in the economy. I should have thought he would welcome that.

Mr. Meadowcroft

What is the Treasury's estimate of the effect on unemployment of 1p off the standard rate of tax, compared with a 10 per cent. reduction in the employers' national insurance contribution, the cost being identical?

Mr. Stewart

The reduction in taxation, whether for individuals or for companies, will improve the level of efficiency and incentives in the economy and therefore lead to a continuation of the very satisfactory expansion in the number of jobs in the economy. I remind the hon. Gentleman that the substantial restructuring of national insurance contributions, which was announced in the Budget last year, has come into force only this winter, so the major effect of that restructuring is still to be felt.