§ 8. Mr. Dykesasked the Chancellor of the Exchequer if he is satisfied with the progress of the United Kingdom's real economy in terms of manufacturing output and overall growth since the beginning of 1985.
§ Mr. LawsonManufacturing output and GDP are expected to have grown by 2½ and 3½ per cent. respectively.
§ Mr. DykesBoth the real and the money figures since 1984 and 1981—the low point—look quite good in certain manufacturing sectors, but the real, ominous truth 1200 remains that in the leading manufacturing sectors the figures in unit, quantity or volume terms are well clown both on 1979 and on 1973. Can my right hon. Friend say, to reassure all of us, that there are other manufacturing sectors—in volume, quantity and unit of output terms, not in money terms—where there has been a big growth since 1984 and 1981? Can he reassure us once again about the miracle of the monetarist counter-revolution?
§ Mr. LawsonIf my hon. Friend is looking for miracles he will not find them anywhere, least of all in the policy changes that he would like to see.
As regards manufacturing, he is quite right. There are some industries that have not done so well and others that have done very much better. Taking manufacturing output as a whole during the lifetime of this Parliament, and up to the third quarter of last year, which is the latest figure that we have, the output of manufacturing industry as a whole is up by more than 7½ per cent. in real terms.
§ Mr. Austin MitchellWe can discount the Minister's optimism, because he is so desperate for signs of good cheer that he would greet the quickening of rigor mortis as a healthy symptom. If he really wants to get the economy going, why does he not bring the pound down from its artifically high level and stop subsidising imports and penalising exports? He could do that by reducing interest rates, which crucify everyone?
§ Mr. LawsonThe hon. Member imagines that devaluation is a cure for everything. No doubt he would also recommend it as a cure for rigor mortis.
§ Mr. HigginsDoes my right hon. Friend agree that as regards manufacturing industry there are two important points? One is the improvement in productivity by a reduction of overmanning, as many companies now find that they can produce the same amount with two thirds of the original labour force. Secondly, profitability in manufacturing industry is probably higher now than in the past decade.
§ Mr. LawsonMy right hon. Friend is right. One of the most encouraging signs has been the increase in productivity to which he referred, both in the whole economy and in manufacturing in particular. Manufacturing productivity, for example, during the life of this Parliament—taking the same period as I took earlier—is up by almost 10 per cent. It is necessary, however, as the CBI fully recognises, if we want to see more of our people in work, for industry to have a tighter grip of wage increases.
§ Dr. McDonaldCould the Chancellor tell the House his current thinking about the impact on British manufacturing output of the highest interest rates ever, higher than those of all the other major industrial countries?
§ Mr. LawsonI indicated at the time of the autumn statement that the outlook was promising for output, and it has not changed since then. It is striking that, unlike the recovery under the Labour Government, in the recovery during the lifetime of this Government we have seen a rate of growth of capital investment, including investment in manufacturing, of 4 per cent. a year compared with 1¼ per cent. a year for investment under Labour.
I do not wish to see interest rates higher than necessary, any more that anyone else does, but I would much rather 1201 have them at this level than have the negative real interest rates that we had under the Labour Government, which were cheating every saver in the land.