HC Deb 16 March 1993 vol 221 cc169-70

It is impossible to review the short-term prospects for the British economy without first considering what is happening in the world outside. Many people talk as if Britain's economic problems were unique, as if we can somehow insulate ourselves from the economic tides that sweep across the world. The truth, of course, is quite different. As ours is an open economy which exports a third of its output, developments abroad have a profound impact on Britain.

The one ray of light on the world scene has been the recovery in north America, and particularly in the United States. The United States economy grew by over 2 per cent. last year, with growth in the final quarter revised up to an annual rate of 4¾per cent.; but the success of the United States stands in marked contrast to developments elsewhere.

Industrial production has been falling in many of the world's largest economies—over the last year it has fallen 2 per cent. in Italy; by 2½ per cent. in France; by 6½ per cent. in Germany; and by 7 per cent. in Japan. By contrast, in Britain, industrial production has actually risen, and the recent indicators of GDP confirm this gloomy world picture. Even Japan has now been visited by the prospect of recession, with gross domestic product declining by ¾ per cent. in the second half of 1992. France and Italy have also had to cope with falling output. And Germany, still struggling with the costs of reunification, has now suffered three successive quarters of declining GDP.

It was against this background that my right hon. Friend the Prime Minister and I secured agreement at the Edinburgh Council last December to a European growth initiative. This was closely modelled on my own autumn statement, and was designed to deal with the most serious problem facing the European Community—and the seemingly inexorable rise in unemployment across the continent.

Last year, unemployment in the Community rose by 1¼ million, and it is projected to rise further this year, to some 11 per cent. of the work force. France, like Britain, has 3 million unemployed; in Ireland and Spain more than one in six are out of work. Even in west Germany, unemployment is rising once again.

To a large extent, this pattern reflects the impact of recession, but, particularly in the European Community, the recent rise in unemployment comes on top of a relentless upward trend. In the Community as a whole, unemployment rose in every single year from 1973 to 1985; and although it fell back in the boom of the late 1980s, it has stayed at well over twice the level of 20 years ago.

Unemployment in Europe is much higher than in many other parts of the world; and it cannot be reduced simply by stimulating demand. A deep-seated problem needs more fundamental solutions. It requires more flexible markets, not just for labour but also for goods and services, and it requires support given by Governments to be directed less at propping up declining industries and more at helping the unemployed to rejoin the work force.

Above all, if we are to secure a lasting reduction in unemployment over the years ahead, we must continue to resist the imposition of job-destroying measures emanating from Brussels.

The high-cost economies of the European Community cannot insulate themselves from the world outside—from the more flexible economies of the Pacific rim and north America. Nothing would do more damage to job prospects, not just in Britain but across Europe, than the imposition of further tax or regulatory burdens on employers. That is why this Government will never sign the social chapter.