HC Deb 15 July 1993 vol 228 cc1104-6
11. Mr. Carrington

To ask the Chancellor of the Exchequer what has been the level of growth for the United Kingdom economy for the last 12-month period for which figures are available; and what was the average figure for the rest of the EC.

Mr. Kenneth Clarke

In the first quarter of this year, GDP in the United Kingdom was 0.9 per cent. higher than a year earlier. Over the same period, GDP in Germany fell by 2.8 per cent. and GDP in France fell 0.6 per cent. In the year to the fourth quarter of 1992—the latest period for which complete figures are available—GDP in the EC as a whole fell by 0.1 per cent.

Mr. Carrington

I am grateful for that answer. Does my right hon. and learned Friend agree that increasing exports are vital to our economic recovery, and that the Prime Minister's championship of free trade and his excellent achievement in putting the general agreement on tariffs and trade negotiations back on the rails are the best tonic that our economy and its recovery could have?

Mr. Clarke

I do agree. It is encouraging to see British industry performing so well in non-European Community markets. We would perform even better in the EC if demand there were not dropping because our partners are still going into recession.

I also agree with my hon. Friend that, because of our record as a trading country and the need to have an export-led recovery, we have to encourage free trade. My right hon. Friend the Prime Minister's contribution to maintaining progress towards a successful conclusion of

the Uruguay round is very much in our interest. It is also in the interest of everybody who wishes to see economic revival generally across the western world.

Mr. Mandelson

In the light of the Prime Minister's comments on Tuesday, when he made his statement following the G7 summit, that the Government were working on new ideas and initiatives to contribute to President Clinton's employment summit in the autumn, will the Chancellor tell the House what specifically new policy ideas and initiatives are being worked out in the Treasury?

Mr. Clarke

I am glad to say that the Treasury is closely involved in discussions with my right hon. Friends in the relevant Departments, such as Employment and Education, to continue to work out policy on education and training, particularly for those between the ages of 16 and 19. As we now spend two and half times as much as was spent on those sectors before we came to power, and as we have introduced a series of training initiatives, all of which were opposed—as far as I can recall—by the Labour party, it is likely that we can be expected to build on an excellent record, having inherited a somewhat bare cupboard.

Mr. Forman

The Chancellor has every reason to be satisfied with our relative performance on economic growth as compared with our partners in the Community in recent times. However, does he recognise, and will he therefore take steps to push forward the idea, that we must be competitive internationally with the new super-competitive countries in the Pacific rim, where growth rates are significantly higher?

Mr. Clarke

My hon. Friend makes an extremely valuable point. For the next generation, we will remain at the forefront of developed and prosperous countries only if we are able to compete with our most challenging competitors—the Japanese and the countries of the Pacific rim and, probably, the north American economies if they recover their normal powerful growth. That is why we have not only to ensure that our own climate is right, but to persuade our European Community partners that Europe as a continent will fall behind if we saddle ourselves with costs on employment and restraints on economic change, which they do not impose on themselves when they are trying to earn their living in Japan or north America.

Mr. Andrew Smith

As 60 per cent. of Britain's exports are to the rest of the EC, is not there a real danger that recession there will knock back the export-led recovery, which we need to sustain us here? Does not that make it all the more important that everything possible is done jointly with our European partners to get economic recovery going in Europe and not have further deflation? What new proposals will the Chancellor put to the European Commission, which is producing the White Paper that will be the basis for the joint economic policy under the Maastricht treaty? Is not it an indictment of the new Chancellor that he has not been able to tell us one new proposal for recovery this afternoon?

Mr. Clarke

I agree with the first part of the hon. Gentleman's question. It is extremely important to us that the rest of the Community comes out of recession, because it is our most important market and we need to see demand revived there. That is why I was glad to take part in the convergence process. I was glad that the Community welcomed the steps that the Government are taking to cut the public deficit and public finances and to improve prospects for recovery. That is why I look forward to urging the Community to take the necessary measures to tackle exactly the same problems, particularly of fiscal deficits, which many member states face.

The main proposal that I shall make to the European Commission is that it should stop putting new burdens on employment and industry. We will certainly make our suggestions for the forthcoming White Paper. They will be based on increased efforts to improve the competitiveness of European industry, including our own, ever-more flexible labour markets, improved education and training, benefits systems that ensure that incentives for work are maintained and keep the unemployed close to employment, and all the other supply-side measures on which the Government have been leading the way in Europe for the past 14 years.

Mr. Nicholas Winterton

Will my right hon. and learned Friend accept that the manufacturing sector of the United Kingdom can make a major contribution to continued economic growth? Therefore, will he consider not only extending capital allowances, which run out at the end of October, but increasing them—they could either run on immediately from 31 October or be introduced in his Budget—because manufacturing industry, particularly epitomised through the Machine Tool Technologies Association, can make a major contribution not only to increasing efficiency and productivity, but to aiding our economic growth?

Mr. Clarke

I agree with my hon. Friend about the importance of manufacturing industry. That is why, when asked about other matters, I kept putting stress on the figures for manufacturing output that we had two days ago. They show that, in the past few months, we have already recovered about half of the drop in output that we suffered in the depths of the recession. My hon. Friend made a Budget representation about capital allowances, which I shall carefully bear in mind. I hope that he will consult his friends in manufacturing industry about his views on the social chapter and his proposed voting intentions in the light of what I have just said about placing burdens on manufacturing industry.