Unemployment (Hansard, 6 May 1993)

1. Mr. Robert Hughes
To ask the Chancellor of the Exchequer if he will make a statement on the effect on tax revenues of changes in the level of unemployment in the United Kingdom over the last year.

§ The Chief Secretary to the Treasury (Mr. Michael Portillo)
There are no reliable estimates of these effects. Estimates would require assumptions about, for example, the reasons for the change in unemployment and its wider economic effects—in particular, its effects on incomes and spending. So many uncertainties are involved that the final estimate would be neither accurate nor informative.

Mr. Hughes
Is it not the case that reliable estimates can be made? It is estimated that the cost this year will be £11.5 billion, which is £2.4 billion more than last year. Is not that an enormous price to pay for the Chancellor's mistakes? Would it not be better if the Government spent that kind of money on stimulating manufacturing investment, instead of perpetuating misery on the unemployed?

§ Mr. Portillo
No. I cannot, for the reasons that I gave, accept that there are such reliable estimates. The variation that would be achieved would critically depend on the reason unemployment was falling. If it was because average earnings were lower or had been held in check or because exports were higher, each would produce different results. As to manufacturing industry, the hon. Gentleman should note that manufacturing productivity is currently at an all-time high and that unit wage costs have been falling in this country while they have been rising in others. Manufacturing exports have never been higher than they are today, and the hon. Gentleman should welcome that.

§ Mr. Alan Howarth
Does my right hon. Friend agree that the best way to defeat unemployment is to keep inflation down, to give clear-cut encouragement to firms to get on and create wealth—not to encumber employers with red tape and extra nonsense from Brussels, such as the social chapter?

§ Mr. Portillo
Yes. I believe that there could be no recovery if we had not succeeded bravely and consistently in bringing down inflation. That was the prerequisite. My hon. Friend is absolutely right to draw attention to the role of deregulation. It must be our continuing policy that the rest of Europe can have the social chapter and we shall have the jobs.

§ Mr. Gordon Brown
Is not the best response to falling tax revenues from high unemployment measures substantially to cut unemployment, not to raise value added tax? In a Market Access survey published today, 75 per cent. of Conservative Members say that they now favour even more increases in VAT—60 per cent. favour VAT increases on newspapers and 27 per cent. favour VAT increases on rail and bus fares. Will the Chief Secretary give a categorical assurance that he and his Government will not increase VAT on food, transport, newspapers arid children's clothes—yes or no?

§ Mr. Portillo
The hon. Gentleman continues to be extremely confused and to believe that one can in some way bring down unemployment to bring about recovery. The opposite is true. One brings about recovery, and that will lead to lower unemployment. That is why we have consistently followed policies that have enabled the recovery to take place.
The hon. Gentleman knows that my right hon. Friend the Chancellor took special care in his Budget to make sure that the increase in the tax burden did not fall on those areas that affected incentives. As to further extensions of VAT, the hon. Gentleman knows exactly what my right hon. Friend and I have been saying—that is not in our minds.