HC Deb 13 February 1986 vol 91 cc1082-4
5. Mr. Beith

asked the Chancellor of the Exchequer whether he will make a statement on the effect that falling oil prices have had on the British economy.

Mr. Lawson

The overall effects of falling oil prices on output and inflation are expected to be broadly neutral—if anything, slightly beneficial.

Mr. Beith

Has the Chancellor recovered sufficiently from the threat to his tax-cutting plans presented by the situation to recognise that it is an opportunity for British manufacturing industry to export, so long as it is not penalised by high interest rates?

Mr. Lawson

I have explained on a number of occasions that there are swings and roundabouts when the oil price falls. One of the things that suffers is the scope for reductions in taxation, and one of the beneficiaries, as the hon. Member has rightly pointed out, as I have done in the past, is industry, particularly manufacturing industry, whose fuel costs are diminished.

Mr. Ralph Howell

Is my right hon. Friend aware that many Conservative Members are becoming increasingly impatient for large tax cuts, and that we hope that the fall in oil prices will not be used as an excuse for not considerably raising tax thresholds? Does he accept that the only real way in which we shall be able to find the elbow room for substantial tax cuts is by reducing over-manning in the public sector, particularly in local government and the Health Service?

Mr. Lawson

I pay tribute to my hon. Friend for the consistent campaign that he has waged over the years for the reduction of overmanning and waste in the public sector. He is right to say that we must always be vigilant. We have achieved a great deal, but there is scope for achieving more, particularly in local government and the Health Service. As for the reduction in the tax burden, he and I are again at one in thinking that it would be highly desirable and beneficial for the British economy and for employment if we could reduce the burden of taxation generally and of income tax in particular. Substantial losses of North sea oil revenue as the result of a sharp fall in the oil price are not an excuse but a fact.

Mr. Campbell-Savours

Does not the fall in oil prices only confirm the point that the Labour party has been making over the past five years, that far too much reliance has been placed on the development of oil in the North sea and far too little reliance on the development of manufacturing industry within the United Kingdom? Why cannot the Chancellor learn that lesson, and even at this late stage begin to reinvest in British industry?

Mr. Lawson

The position is quite to the contrary. It is the hon. Gentleman's Front Bench that is in favour of joining forces with the OPEC cartel, so as to keep up the price of oil artificially, which would be contrary to the interests of manufacturing industry. That was clearly stated in a letter to me from the hon. Member for Thurrock (Dr. McDonald).

Mr. Ian Lloyd

I congratulate my right hon. Friend on the Government's effective, well-judged and, above all, sustained attempt not to join OPEC in any sense. Does he agree that nothing does more damage to the capacity of the free market to adjust to changed conditions of supply and demand than an attempt to maintain either fixed supply levels or fixed price levels?

Mr. Lawson

My hon. Friend is right, and in all fairness I have to add to my previous remarks that it is not merely the policy of the Labour Opposition that Britain should join forces with OPEC, but also the official policy of the SDP and, as far as I am aware, that of the Liberal party as well. The right hon. Member for Plymouth, Devonport (Dr. Owen) has made this clear. We have no intention of joining OPEC.

Mr. Skinner

Does the Chancellor of the Exchequer recall hearing the hon. Member for Norfolk, North (Mr. Howell) refer to sacking people in the National Health Service and local government? What is the economic sense in stopping the payment of wages to people working in the National Health Service and local government, who are paid for by the ratepayer and the taxpayer, only for them to go to the unemployment benefit office to receive money from the taxpayer in another form? It is costing £24 billion to finance—

Mr. Speaker

Order. The question is about oil prices.

Mr. Skinner

Yes, it is. The hon. Member for Norfolk. North, raised this matter and he was not stopped, Mr. Speaker. The Government are paying £24 billion to finance that pile of human misery known as the dole queue. What is the sense in adding to it?

Mr. Lawson

I am not sure whether that question is in order, Mr. Speaker, but I shall be brief. Overmanning in many local authorities, especially Socialist local authorities, is a main cause of unnecessarily high rates, which are causing great damage to small businesses in those areas.

Sir Peter Tapsell

Will my right hon. Friend remind the House that it is irrelevant however many of our Opposition political parties decide to join OPEC, because the fundamental national qualification to join is that 80 per cent. of the gross national income should be from oil. We have not yet reached that point.

Mr. Lawson

Nor shall we. If my hon. Friend had been his normal attentive self, he would have heard that I talked about joining forces with OPEC. The Opposition wish to agree with OPEC in cutting our production, which is effectively joining the cartel, although, technically, as my hon. Friend has pointed out, we would not be eligible for membership.