HC Deb 08 February 1996 vol 271 cc462-4
10. Mr. Riddick

To ask the Chancellor of the Exchequer if he will give official growth forecasts for 1996 for (a) the United Kingdom, (b) the EU and (c) Germany. [12645]

Mr. Waldegrave

As set out in the November "Financial Statement and Budget Report", we expect the United Kingdom economy to grow by 3 per cent. in 1996. The European Commission forecasts European Union growth of 2.6 per cent. in 1996, and the latest official forecast for growth in Germany in 1996 is 1.5 per cent.

Mr. Riddick

Does my right hon. Friend agree that the level of growth in this country will help the continued fall in unemployment? Is he aware that, in January, unemployment in France hit the 3 million mark and that it is forecast to hit 4 million this month in Germany? When before was British unemployment almost half that of Germany's? Is that not a ringing endorsement of the British Conservative approach of free markets and minimum labour regulation?

Mr. Waldegrave

I strongly agree with the implication of my hon. Friend's question. I do not think that there has been a time since records began when the relationship between British and German unemployment was so favourable to us. It is no benefit to us that the German economy is slowing down, but it cannot be denied— German leaders are now saying this—that the over-taxing and over-regulation of that economy is largely the cause of its slowing down.

Mr. Sheerman

The Minister would not want me to nit-pick about the fact that the reunification of Germany has had a significant effect on the figures.

How realistic are the targets for growth? Surely the Minister should wake up to the fact that manufacturing output is less now than it has been at any time since 1992 and that we appear to be heading for another deflation and another recession under the present Government.

Mr. Waldegrave

It would be unwise of the hon. Gentleman to nit-pick in the way that he suggests, because unemployment in the former West Germany is increasing too, I am sorry to say, so his argument would be invalid.

Growth in the United Kingdom in the coming year will outpace that in Germany and in most of our competitor countries. That is happening because the liberal economics that the Government have been following are right, and the type of mid-1960s so-called stakeholder economy favoured by the Labour party is producing exactly the wrong results.

Mr. Forman

While I warmly welcome the figures given in my right hon. Friend's original answer, does he accept that we have the best possible chance of maintaining our comparative lead in the European Union if we give a high priority to continuing with our supply side policies—deregulation, privatisation and supply side reform?

Mr. Waldegrave

I strongly agree. I would quote in aid of my hon. Friend's argument the article by Gavyn Davies, an economist who is respected on both sides of the House, I believe, in The Independent on Monday 5 February, headed: No reason to copy the fading German miracle". Copying the fading German miracle is exactly the policy of the Labour party—the old social consensus management schemes of the 1960s, which are producing the very problems out of which Germany needs to get.

Mr. Darling

On growth forecasts, both the Prime Minister and the Chief Secretary have told us that they believe that the public spending ratio should be 35 per cent. of GDP, but the Chancellor told the Financial Times that, in his judgment, 40 per cent. was the maximum that we should aim at. Which figure is right, and why cannot the Chancellor bring himself to mention the figure of 35 per cent.?

Mr. Waldegrave

That is one of the most bogus of the Opposition's soundbites at the moment. It entirely depends on the timing. Let us get to 40 per cent. first and then, if the economy grows, as it continues to grow under the Tories, and if we restrain spending—my right hon. and learned Friend has been one of the toughest Chancellors in recent years in controlling spending—the proportion will fall further.

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