HC Deb 04 November 1993 vol 231 cc503-4
3. Dr. Liarn Fox

To ask the Chancellor of the Exchequer to what he attributes the fall in unemployment earlier than expected in the economic cycle.

Mr. Kenneth Clarke

Unemployment has fallen by 84,000 since January of this year. This may in part reflect the improvements that we have made to labour market flexibility as part of our supply-side reforms and our continuing efforts to keep the level of non-wage costs on employers down to levels lower than those in other European economies. Our opt-out from the social chapter is an important element in encouraging the growth of employment in the United Kingdom.

Dr. Fox

Does my right hon. and learned Friend accept that as the economy gathers pace, it will do so not only because of the labour reforms of the 1980s but because of a whole range of supply-side reforms? Does he further accept that those reforms were totally opposed by the Opposition and have been possible only because we have had consistent and consecutive Conservative Governments?

Mr. Clarke

I quite agree with my hon. Friend. Not only have we improved the labour market, but we have created a much better climate for investment, for small businesses and for business start-ups and we were much more successful than most of our competitors in creating new jobs before the recession from which we are now emerging first struck us. Almost all the relevant measures were opposed by the Labour party, which still seeks to impose on us the costs of the social chapter. Labour still harks back to a regulated labour market and, as we saw only last night, its vision of the future is to keep in nationalisation the great traditional industries of this country.

Mr. Beith

Does the Chancellor realise that the rosy picture that he has painted is not true of the construction industry, in which the recovery is still very fragile? Has he noted the representations of construction employers, to the effect that as many as 100,000 jobs could be lost in the industry if there are cuts in capital expenditure in the Budget? Does he realise that this is the right stage in the cycle to ensure, if possible, higher capital expenditure in construction—expenditure that will bring rewards in terms of taxes paid by employees, fewer benefits paid out and assets obtained for the future at a good price?

Mr. Clarke

I am well aware of the troubled state of the construction industry. I agree with the right hon. Gentleman that that is a matter for great concern. The Government sustained the level of public sector capital investment in the last Budget and we are making great progress in delivering private sector investment in capital projects in the public services. We must certainly build on that. The recent placing of contracts for the Jubilee line shows what can be achieved and there are a number of other projects across the country in which private sector management skills and finance could boost capital investment and help the construction industry.

Mr. Anthony Coombs

Does my right hon. and learned Friend agree that the best way to protect and promote employment is to ensure that our industry is competitive by reducing unit costs and by precisely the sort of productivity improvements that have been and are being achieved by manufacturing industry? Is he aware that companies in my constituency are bringing over from Germany capital equipment that can be used profitably here to re-export goods? Because Germany is weighed down by the costs of the social chapter and other social costs, that is not possible there. Should not we therefore avoid the social chapter as far as possible, to enable our industry to be competitive? Do not the Opposition fail to recognise that?

Mr. Clarke

British industry's achievement—of continuing to improve productivity throughout 1993—is an extremely important basis for our strengthening recovery. Productivity increased by 41/2 per cent. That is an extremely good record which I am sure underlies our good performance in non-EC export markets. We will do better in our EC markets once our European competitors and their markets start to show the sort of recovery that is beginning here in Britain.

My hon. Friend's other message is one that we need to reiterate over and over again. German employers are envious of the conditions that we have created, which are more attractive for inward investment and the creation of new jobs.

Forward to