§ 1. Mr. Spring
To ask the Chancellor of the Exchequer what conclusions he draws from the trend in manufacturing output.
§ The Chancellor of the Exchequer (Mr. Kenneth Clarke)
Manufacturing output continues to grow strongly, which shows the strong competitive position that has been achieved by British industry.
§ Mr. Spring
Does my right hon. and learned Friend agree that, with the most welcome rising trend in manufacturing output and the further rise in third quarter gross national product, Britain remains on course for a sustainable economic recovery? Does he agree that that is due to the sensible policies that have been pursued by a Conservative Government and, in view of those economic successes, will he assure the House that he will continue to stick to his guns?
§ Mr. Clarke
I agree with my hon. Friend. We are poised for strong recovery that can be sustained and combined with low inflation, and I am particularly glad that British manufacturing is playing such a key part in that. I further agree that this situation would not have occurred had the Government not been prepared to take difficult decisions to get the public finances healthy again, to follow monetary policies designed to maintain low inflation and to put in place the stable framework of which British manufacturing industry is now obviously beginning to take advantage.
§ Mr. Gordon Brown
What effect will the interest rate rise and the seven further tax rises that the Chancellor is planning have on output and on the growth of the economy? Does the Chancellor recall the promise that the Prime Minister made when he fought the last election that there would be no extension of VAT in particular? Will he use this opportunity to rule out any extension of VAT to food, to children's clothes, to books or newspapers or to train fares as a result of any Budget that he might introduce?
§ Mr. Clarke
I thought that new Labour was in favour of the interest rate rise that I announced and that the new, responsible Labour party followed my lead in saying that we take no risks with inflation. The hon. Gentleman has advised me to reduce interest rates on each and every occasion for the past 18 months. If his former advice had been followed, it would have caused high inflation and brought this recovery to an end. Until the hon. Gentleman states what spending he would cut, as opposed to raise, he cannot really address Conservative Members on inflation. As for budgets, he must wait for the Budget and he knows perfectly well that there are only a few weeks to go.
§ Mr. Budgen
Does my right hon. and learned Friend agree that a floating exchange rate must also be said to have played some part in the present happy state of affairs?
§ Mr. Clarke
The exchange rate has been extremely stable over the past 18 months—as long as I have been 990 in this post—as a result of the extremely responsible policies that we have pursued in getting on top of our fiscal deficit and showing that we are prepared to follow responsible monetary policies. If my hon. Friend is trying to lead me back to his theory that the present recovery is a sole result of certain changes in the exchange rate that occurred about 18 months ago, he knows that I regard that as nonsense. In fact, the current policies of the Government have very much more to do with the strong manufacturing recovery in Britain.
§ Mr. Sheldon
If the manufacturing recovery is to be strongly based, will it not be necessary to do something about investment allowances and the absurd notion that 25 per cent. is the maximum that the Chancellor can afford to give for manufacturing investment? If we are to achieve the capacity increase that we require, he must do something about that.
§ Mr. Clarke
Investment, I am glad to say, is strengthening considerably at the moment, including manufacturing investment. The present recovery looks set to be a healthy recovery, led by exports, with investment strengthening rapidly and consumer growth continuing in a sustainable way. I do not accept that indiscriminate investment allowances automatically produce the kind of investment that boosts growth. It is the quality of investment that matters. The old eastern European countries, the Soviet bloc, used to produce marvellous figures for investment, but the quality of the investment was so bad that they were among the worst performing economies in the world.
§ Mr. Jenkin
May I congratulate my right hon. and learned Friend the Chancellor and the Government on the stable framework to which he alluded, which brought about this upturn in manufacturing output? Does he agree that it is now time to make it clear that we will not flirt with the idea of a single currency in Europe? Will he endorse the words of my right hon. Friend the Prime Minister who, as Chancellor of the Exchequer, said in November 1990 that the single currency in Europe is about the politics in Europe and federalism by the back door?
§ Mr. Clarke
In my experience, flirtation requires more than one person. The single currency is not being actively pursued anywhere within the European Union. If the question of economic and monetary union arises in future, I look forward to debating it with my hon. Friend. However, the judgment that we should both seek to make about it is whether it is in British interests at the time to participate. That is the position that my right hon. Friend the Prime Minister reserved for this country when he negotiated the Maastricht treaty.