§ 4. Mr. Patrick Thompson
To ask the Chancellor of the Exchequer what comparisons the European Commission has made between Britain's projected growth rate over the next two years and the growth rate in other countries of the EC.
§ Mr. Kenneth Clarke
The European Commission expects that Britain will be the fastest growing major Community country in both this year and next.
§ Mr. Thompson
On the day when unemployment is continuing to fall in my constituency of Norwich, North and throughout the country, does my right hon. and learned Friend agree that over-regulation of the social and labour markets can damage growth, as has happened in Spain, for example, which has one of the highest unemployment rates in Europe? Will he comment on the folly of those in the House who seek to add to the burdens on industry at a time when business is reviving and unemployment is falling?
§ Mr. Clarke
I entirely agree with my hon. Friend. We have the highest proportion of population in work of any country in the European Community with the exception of Denmark and, I think, Luxembourg. We have always shown the capacity to create jobs more quickly than other European countries because we have avoided the tightly regulated labour markets and the excessive burdens on industry, which are part of the tradition of some continental countries. It is a pity that that tradition is being reinforced by the social chapter making problems worse, in my opinion, in Germany, Spain and elsewhere. It is extremely important that we in Britain stick to our 1099 opt-out from the social chapter, which is helping to achieve a much more buoyant recovery in our labour market.
§ Mr. Trimble
It not it the case that better prospects for the United Kingdom growth rate are due to the fact that we were ejected from the exchange rate mechanism and were thus able to reduce interest rates and reduce the level of sterling? Is not the last thing that we want now either to see interest rates maintained at a higher level than necessary or to see sterling appreciate? Is not there a case for some action on that front?
§ Mr. Clarke
The answer to the hon. Gentleman's first question in my opinion is no. The five-points reduction in interest rates that we achieved before we left the ERM was as important a contribution to our recovery as the four-point reduction in interest rates that followed. We were seeing the beginnings of recovery before we left the ERM and we are now seeing the results of many of the supply-side changes that we made in the British economy.
Obviously, the hon. Gentleman will not expect me to answer questions on any further action on interest rates. I shall make judgments as and when they are necessary in the light of the monetary guidelines that I have laid out before the House.
§ Mr. David Martin
Does my right hon. and learned Friend agree that the way in which to create real jobs is to have sustained economic growth, rather than the Keynesian-inspired spending sprees supported by the Opposition parties?
§ Mr. Clarke
What is now called Keynesian does not often bear much resemblance to the work of John Maynard Keynes, who was very good on monetary policy. I agree that I do not think that John Maynard Keynes or anyone else would have advocated a spending spree to boost the economy at a time of a large fiscal deficit of the kind that we are carrying and is being forecast. That is not an option open to us. Unfortunately, it is an option which is usually seized by the Labour and Liberal parties because they are so detached from the real world.
§ Mr. Gordon Brown
Should not the Chancellor be alarmed rather than complacent about the finding of the competitiveness unit published this week that British productivity is 25 per cent. below our main competitors, that what it calls our low skills base and research effort are among the worst in Europe, that our national income per head is falling behind that of Finland, Iceland and Italy and that it is now falling to the levels in Spain and Portugal? Amid all those challenges, and now that we have a new Chancellor, where are the new policies?
§ Mr. Clarke
The hon. Gentleman has taken some selective readings from the extremely valuable document on competitiveness produced yesterday. At least it has enabled him to ask a question without adding to the public sector borrowing requirement, as far as I noticed. He comments on our level of productivity. My right hon. Friend the President of the Board of Trade is right to point out that our productivity is still below that of some of our major competitors, most notably the Japanese.
Throughout the 1980s, we have had the fastest improvement in productivity of any of the G7 nations. It shows how bad things were in 1979 that we still have not caught up with our foremost competitors. If the hon.
1100 Gentleman looks at the good news today, yesterday and the day before, he will see that the improvements in productivity in British industry during the recovery are quite remarkable and have contributed to the 3 per cent. increase in manufacturing output compared with a year ago, which is the first substantial achievement of this recovery.
§ Mr. Wilkinson
Has my right hon. and learned Friend seen the latest statistics on the rapid and dramatic decline in car sales in EC countries? Sales there have dropped by no less than 17 per cent. over the past six months, whereas in this country which, thank goodness, is out of the exchange rate mechanism and can again enjoy the benefits of low interest rates and growing demand, we have had double-digit increases in car sales. Would not the French and the Spanish industrialists, for example, agree that the British are much luckier than they are because we are not constrained by artificially high interest rates?
§ Mr. Clarke
There are other countries that were forced out of the ERM and not all of them are enjoying a British recovery. In terms of the ERM, my hon. Friend is right to point out that the buoyant state of car sales in this country is not matched in other major centres in the European Community. The fact is—let me be cautious again—that we are showing some signs of recovery and it is being sustained at the moment, although we must persevere to keep that up and trust that it strengthens.
In Germany, in France and even in Japan, there are falls in manufacturing output on the latest figures, whereas we have just seen the encouraging figures showing 3 per cent. more than a year ago in our manufacturing output announced only two days ago.