Economic Recovery (Hansard, 17 October 1991)

§ 11. Mr. Wareing
To ask the Chancellor of the Exchequer if he will make a statement on the progress towards economic recovery in the United Kingdom.

§ Mr. Mellor
Recent developments are entirely consistent with the Budget forecast for recovery in the second half of the year.

§ Mr. Wareing
Will the economic recovery this time mean a real fall in unemployment and business bankruptcies, or will it be like the so-called improvement in the British economy between 1979 and 1989, where there was a 39 per cent. increase in consumer expenditure, but only a 10 per cent. increase in British consumer production, leading to a 94 per cent. increase in consumer imports and a colossal balance of payments deficit?

§ Mr. Mellor
That is an extraordinary description of 10 years which I suspect many people found to be among the most prosperous and successful they have ever lived through. At the beginning of that period Britain was bottom of most of the industrial league tables; at the end of it we were at the top. That is the true record of the 1980s.

§ Mr. Higgins
Does my right hon. and learned Friend agree that economic recovery is being assisted by the Chancellor's acceptance of the unanimous view of the Treasury and Civil Service Select Committee that the automatic stabilisers should not be inhibited at a time of recession? Is not it entirely appropriate to run a larger public sector borrowing requirement at a time of recession to assist recovery; and is it true that this should in no way undermine international confidence in the position of the economy?

§ Mr. Mellor
I am most grateful for my right hon. Friend's remarks. We aim for a balanced budget in the medium term. In some years a surplus on public finances has been achieved; in others, such as this year and next in our forecasts, we shall certainly run a public sector borrowing requirement, but within manageable levels—unlike the 9½ per cent. PSBR that the previous Government ran up 15 years ago.

Mr. John Smith
Are the Chief Secretary and the Government at all concerned about the dramatic fall in investment in the manufacturing sector? Can he explain how we can possibly recover by means of an investment-led recovery if investment in our manufacturing sector keeps falling? How will we ever manage to counter the unemployment that is raging through the manufacturing sector, with more and more redundancies announced every day? How can we do any of those things if investment keeps falling? What do the Government intend to do about this serious situation?

§ Mr. Mellor
The facts are totally contrary to what the right hon. and learned Gentleman says. Any fall in investment during this recession has been from historically high levels—[Laughter.] Since the Opposition find it amusing I shall give them the figures. At 1985 prices, the 435 average investment per year in manufacturing for the six years of the Labour Government was £9.8 billion. For the past six years of this Government the average was £10.9 billion a year. Gross domestic investment in plant and machinery in Britain at 1985 prices was £19.7 billion in 1979 and £32.6 billion in 1990.