HC Deb 17 July 1986 vol 101 cc1162-4
8. Mr. Dixon

asked the Chancellor of the Exchequer what estimate he has made of the comparable cost per job of jobs created as a result of (a) tax cuts and (b) public spending.

Mr. Lawson

The hon. Gentleman's question is based upon a fallacy. Lasting jobs cannot be bought. What matters is the performance of the economy, and in general this is more likely to be improved by reducing the burden of taxation than by increasing Government spending.

Mr. Dixon

The right hon. Gentleman must be aware that every objective study has suggested that public expenditure is far more effective than tax cuts in creating jobs. Evidence given to the Employment Select Committee said that infrastructure investment was cheaper and quicker than tax cuts in creating jobs. This investment would also provide much needed roads, sewers, schools, hospitals and house refurbishment. When will the right hon. Gentleman concern himself with the 4 million people who are unemployed and less about putting a couple of pennies in the pockets of those who are employed?

Mr. Lawson

I recall an opinion poll recently which showed that the overwhelming majority of Labour voters wanted a reduction in the basic rate of income tax, even though Labour Members of Parliament did not. The studies to which the hon. Gentleman referred do not look at the supply side effects of either public expenditure or the reduced burden of taxation. The supply side effects are absolutely crucial in determining the performance of the economy and, therefore, the level of employment.

Mr. Dickens

Is it not right that if we take the grasping hand of the national Government and the grasping hand of local government out of people's pockets, that will benefit individuals and their families, industry and charities, which we were talking about earlier?

Mr. Lawson

My hon. Friend characteristically puts it very well indeed.

Mr. Hoyle

Will the Chancellor and other Ministers stop sounding like a record on which the needle is stuck? Is it not true that they keep repeating the same old fallacies without there being any effect on the economy? Has the Chancellor taken account of the fact that tax relief will probably suck in imports, whereas the same money used in public spending would benefit all?

Mr. Lawson

I have to disappoint the hon. Gentleman by informing him that the facts of life and the laws of arithmetic do not change from week to week or from year to year.

Mr. Cow

If the consequence of high public expenditure is a diminution in unemployment, how is it that, under the Labour Government, when public expenditure rose massively, unemployment also doubled? Is my right hon. Friend aware that it is only by reducing the levels of taxation that we shall encourage greater activity in the economy?

Mr. Lawson

My hon. Friend is right. He was an especially close, astute and penetrating observer of the follies and misfortunes of the last Labour Government. He makes an important point. It was during the early period of the Labour Government—what one might call their red period, the pre-IMF period, when they were boosting public expenditure extravagantly — that unemployment doubled. My hon. Friend is absolutely right. There is no solution to the problem of unemployment by increasing public expenditure, whether by the £24 billion which the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) wants, or by an even larger figure.

Mr. Terry Davis

The Chancellor referred to what a majority of Labour voters want. Is he aware that a majority of all voters want a reduction in unemployment? Everybody — the National Institute for Economic and Social Research, the Henley Centre for Forecasting, the London Business School, Cambridge Econometrics, the Select Committee on Employment and the House of Commons Library, using the Treasury's economic model — agrees that sensible increases in public expenditure provide more jobs than do tax cuts. Why will the Chancellor not change his economic policy and base it on the facts instead of on his personal prejudice?

Mr. Lawson

My policies are based on facts and not on artificial calculations by computer models or any other models.

Mr. Davis

This is the right hon. Gentleman's model.

Mr. Lawson

These are models which do not capture the supply side of the economy, which is critical to the performance of the economy and, therefore, the creation of jobs. That is what matters. It is no accident, as my hon. Friend the Member for Amber Valley (Mr. Oppenheim) said earlier, that the two most successful economies in the world—Japan and the United States—have the lowest proportion of gross national product taken in taxation.

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