Interest Rates (Hansard, 27 October 1994)

§ 4. Mr. Booth
To ask the Chancellor of the Exchequer what effect interest rate reductions since October 1990 have had on the economy.

§ Mr. Kenneth Clarke
Low interest rates have contributed to the broad-based recovery that we are now experiencing. Monetary policy will continue to be aimed at low inflation to ensure that growth can be sustained over the years ahead.

§ Mr. Booth
As long-term investment, stability and the low interest rates to which my right hon. and learned Friend referred are vital ingredients in the success of our economy—success that is evident in my constituency of Finchley at successful firms such as Pentland, Witherspoon's and Gerson—will he assure us that he will continue to reinvigorate and reinforce those successful policies?

§ Mr. Clarke
I can certainly give my hon. Friend that assurance. He will know that interest rates, although raised to 5¾ per cent. from their previous level, are still at their lowest level since 1972. I believe that we will be able to keep interest rates down and consistent with our monetary policy if we act in good time, if our fiscal policy is sound and if we keep on the course that we have set. I agree with my hon. Friend that companies such as those that he named are now well placed to take advantage of that, and I am glad to say that they are beginning to deliver the prosperity and jobs that the country needs.

§ Mr. John Evans
The Chancellor of the Exchequer constantly boasts about the successful economy and falling unemployment. Is he aware that no one with any intelligence takes any notice of the Government's unemployment statistics? Will the Chancellor confirm that more than 1 million people are unemployed and are economically active but do not appear in any unemployment statistics? Will he confirm that the latest scam, the job seeker's allowance, will save the Treasury millions of pounds and take another 90,000 out of the unemployment statistics?

§ Mr. Clarke
The hon. Gentleman questioned me in the past when I was an Employment Minister. He knows that I have never taken too seriously the figures for benefit recipients as a measure of unemployment in this country; they are used as the basis of fairly lightweight political exchanges inside the House and outside. I take seriously the labour force survey, which I always used to protest was a much better measure of unemployment. I am glad to say that that is currently 994 showing real falls in unemployment in line with the headline count and an increase in employment of about 750,000 new jobs. The hon. Gentleman cannot deny that the present real recovery in manufacturing and the British economy is generating new jobs—it is the only way that we can generate new jobs—and that we are on course in the medium term to get unemployment down to an acceptable level.

§ Sir Thomas Arnold
Does my right hon. and learned Friend agree that we are living in a deflationary world and that there is still plenty of spare capacity in the British economy?

§ Mr. Clarke
I am interested to hear that. I gaze at surveys and all sorts of data, and I have many conversations with people in British business to judge whether capacity constraints are likely to affect our performance. No one can measure it; it is a matter of judgment. So far, we are all satisfied that there is spare capacity in the economy; it has been rising above the trend for some time. I shall make judgments as I go along on the best evidence that I have to keep the recovery as strong as possible and consistent with our monetary targets and the maintenance of low inflation.