Growth

HC Deb 28 February 1991 vol 186 cc1105-6

7. Mr. Radice

To ask the Chancellor of the Exchequer what are the latest OECD forecasts for growth in the United Kingdom and Germany in 1991.

Mr. Mellor

The OECD, in its December "Economic Outlook", forecasts GDP growth of 0.7 per cent. for the United Kingdom and GNP growth of 3.0 per cent. for West Germany. No figures are available for the united Germany.

Mr. Radice

Does the Minister agree that those official OECD figures, which probably underestimate the fall in British output, show clearly that the British problem is home grown and is caused by two years or more of very high interest rates?

Mr. Mellor

I appreciate the seductive quality of that argument for the hon. Gentleman, but, unfortunately, it is not true. A number of countries—the United States, Canada, Australia and Sweden—are in recession and in France GDP fell in the last quarter. So the hon. Gentleman is not paddling the right canoe.

Mr. Ian Bruce

Does my right hon. and learned Friend agree that Germany's one advantage is that it has a population who believe in low inflation and that when wage demands are made by trade unions, they talk about paying for increases by greater productivity? Does he further agree that if we could follow their example—keeping inflation low and having wage demands met by productivity—we, too, could achieve continued growth without high inflation?

Mr. Mellor

My hon. Friend is right. Indeed, we have proved it to be so. Between 1980 and 1990, the United Kingdom economy, by learning those lessons, grew faster than that of West Germany, whereas when the Labour party was in power we were bottom of the European growth league.

Mr. John Smith

Can the Chief Secretary explain why, after 11 years of Conservative rule, the United Kingdom is the only country in the European Community to be in recession by having a fall in GDP for two quarters and is the only country in the EC to be cutting investment in the manufacturing sector?

Mr. Mellor

The right hon. and learned Gentleman knows that there have been falls in productivity, output and production in a number of European countries. He also knows that the 1980s was a decade of unparalleled success for the United Kingdom economy. With the greatest respect to the right hon. and learned Gentleman, he could not have said that about the previous decade when he was a Cabinet Minister.

Mr. John Marshall

Does my right hon. and learned Friend agree that one year's forecast is not a totally accurate guide to the health of an economy, but that a decade is a much better guide to the success of economic policies? In the 1980s our economy thrived, unlike many in the European Community.

Mr. Mellor

That is exactly right. We were at or near the top of most of the economic indicator leagues in the Community, whereas under the Labour Government our economy was at the bottom of those leagues. The Opposition keep on talking the British economy down, but we have confidence in it.