§ 7. Mr. Simon CoombsTo ask the Chancellor of the Exchequer what is his latest estimate of the rate of growth of the economy in the current and next years. [12680]
§ Mr. Kenneth ClarkeI expect the economy to grow by 3 per cent. in 1996 and by 3¼ per cent. in the year to the first half of 1997.
§ Mr. CoombsWould my right hon. and learned Friend care to tell the House where those excellent figures put Britain in the league tables for growth both in Europe and among the Group of Seven countries? What advice would he offer to other Governments, and to those who yearn for Government, on the best way of maintaining such levels of sustainable growth?
§ Mr. ClarkeWe have had the fastest growth of any major European country since the recovery started in 1992 and we are likely to continue to achieve that. Forecasting is always a difficult business, but I suspect that we are likely to have the fastest growth in the G7. That is because of the combination of policies that we are putting in place and the excellent competitive position that British industry has achieved.
§ Mr. MacShaneIf growth is so superlative, will the Chancellor of the Exchequer tell the House why the CBI has said this morning that exports are falling across all regions? Why is Jaguar laying off, or putting on short time, 1,000 people? Why is the steel industry having to go on to short time? What is the gap between the rhetoric of the Chancellor and the reality of an ever-declining manufacturing base in this country?
§ Mr. ClarkeThe reason our exports are not doing so well is that other countries are not doing as well we are. When France, Germany and, to a certain extent, the United States of America do not achieve the sort of growth that we achieve, their markets do not expand quickly enough for our competitive exports to perform quite so well. Nevertheless, we expect—as does everybody—an increase in disposable consumer income this year. Everyone accepts that conditions for investment are very good. Manufacturing investment went up by 12 per cent. last year alone. It could achieve at least that this year. It is not true that we have a declining 460 manufacturing base; manufacturing is continuing to do extremely well in this country and will do better when other countries begin to match our performance and provide the markets for our goods and services again.
§ Mr. John TownendIf there is any danger of the Government not achieving their 3 per cent. growth targets, will my hon. and learned Friend not hesitate to make further reductions in interest rates? I should like to take this opportunity of congratulating him on how he has dealt with interest rates over the past 12 months.
§ Mr. ClarkeI am grateful for my hon. Friend's last point. We set interest rates in order to achieve the inflation target and we shall continue to set interest rates on that basis. That is why—I think that everyone now accepts this—we shall achieve our 2½ per cent. inflation target by the end of this Parliament. We shall keep the target at 2½ per cent. or below during the next Parliament. Low inflation is helping to create the competitive position of British industry, the new jobs that the economy is creating, and the steady and continuous fall in unemployment that we have seen over the past 18 months.
§ Mr. Mike O'BrienIs it not true that Britain is floundering, and that the truth is a long way from the rosy picture painted by the Chancellor? Growth is lower than the Government predicted last year; Professor Patrick Minford—a Government adviser—said today that it will be less than 2 per cent. this year. Non-oil growth since 1979 has averaged 1.7 per cent.—the worst record of any post-war Government. Britain has fallen from 13th to 18th place in the international prosperity league. The reason for that is that Tory economic incompetence has let down the hard work of the British people.
§ Mr. ClarkeThe sadness for the hon. Gentleman is that he knows perfectly well that the truth is as I have just described it—it is difficult for a party in opposition, such as his own, to accept that. I am astonished to hear the hon. Gentleman pray in aid Patrick Minford, a man whom I have known and liked for many years; the two of us have never agreed on economic policy, as he is far to the right of me and far to the right of any of the wise men—or wise persons—who now advise me. One thing on which Patrick Minford and I are totally agreed is that the Labour party's recipe, with the social chapter, minimum wage, more Government intervention, higher tax and higher public spending, will be totally disastrous for this country and will put us way down any league table that anybody likes to produce.
§ Mr. YeoWill my right hon. and learned Friend confirm that the estimates that he gave for the growth of our economy are based on an assumption that Britain will not be burdened with the obligations of the social chapter? Does he further agree that if we were to be burdened with those obligations, that would undermine our competitive position faster than any other single policy change and would reduce the prospects for cutting unemployment in this country more seriously than any other policy measure?
§ Mr. ClarkeI totally agree with my hon. Friend. It is totally absurd for the Labour party to try to scoff at that argument. It makes an enormous difference to the jobs 461 market if extra non-wage costs are piled on to the employer. Extra costs on top of wages for an employer in France are more than double those in the United Kingdom, which is why France has unemployment of more than 10 per cent. and is troubled with problems, while the unemployment rate in this country is falling so steadily. That message must be spread across the rest of the continent—meanwhile, we are benefiting, with more than 500,000 new jobs and an unemployment rate which is already down by 750,000 from its peak.