HC Deb 03 March 1994 vol 238 cc1058-9
5. Mr. Trimble

To ask the Chancellor of the Exchequer what is the Treasury's current estimate of the rate of growth for this year and next year.

The Chief Secretary to the Treasury (Mr. Michael Portillo)

At the time of the Budget, United Kingdom gross domestic product was forecast to grow by 2.5 per cent. both in 1994 and in the year to the first half of 1995.

Mr. Trimble

That is an extremely low rate of growth. To cope with the Government's problems with public expenditure in the medium term, they will have to take measures to increase the rate of growth. Can the Minister give an assurance that the Government will consider taking such measures and not allow themselves to be influenced by spurious foreign exchange considerations or panicked by the current problems in the bond market?

Mr. Portillo

The principles underlying the Government's monetary policy have been set out time and again and are extremely clear. People believe that that monetary policy enjoys great transparency. The hon. Gentleman is wrong to say that our rate of growth is very low. After all, the United Kingdom will have the fastest rate of growth of any major European Community country in both 1994 and 1995. The rate of growth that we want to see is one that is sustainable.

Mr. Heald

Does my right hon. Friend agree that flexible labour markets and improved competitiveness in Britain have made ours the fastest-growing economy in Europe and that what we need is more Conservative policies and more deregulation so that Britain can continue that programme?

Mr. Portillo

My hon. Friend is right. Obviously, we have reaped the benefits of the reforms that we undertook in the 1980s. The reforms through trade unions and the scrapping of the wages councils have led to a downturn in unemployment in the United Kingdom much sooner in the recovery cycle than we expected, and sooner than has been experienced in other countries. That is a tribute to the policies that we have followed over the past decade.

Mr. Radice

What is the Chief Secretary's estimate of the current output gap?

Mr. Portillo

Our view at the moment is that there are no inflationary pressures that would justify any movement. There is an output gap at present, but I do not wish to quantify it. There is spare capacity in the United Kingdom, which is one of the reasons for thinking that the inflationary pressures are moderate.

Mr. Forman

Is not the important thing about output for economic growth in this country that it is likely to be sustainable, non-inflationary and at a level that we can carry through over the years? In that context, is it not important that there are signs that industrial stock building is taking place again and that that is likely to lead to a further growth in investment, which puts the recovery on a very sound basis?

Mr. Portillo

My hon. Friend makes an important point. His first underlying point is vital. What we need to see in the United Kingdom is growth from year to year. We wish to see growth at a sustainable level; we do not wish to see inflationary pressures building again. We can be well satisfied with the present conditions. The Government make the inflationary and monetary prospects extremely clear month by month.