HC Deb 07 March 1996 vol 273 cc436-9
2. Mr. Jacques Arnold

To ask the Chancellor of the Exchequer what are the current rates of economic growth and of unemployment in Britain; and what are the comparable figures for other European Union countries. [17617]

3. Mr. Devlin

To ask the Chancellor of the Exchequer what is the current level of unemployment; and what assessment he has made of the level relative to those of other European Union countries. [17618]

The Chancellor of the Exchequer (Mr. Kenneth Clarke)

Britain has enjoyed the strongest recovery of any major European economy, and in the fourth quarter of last year it grew faster than those of Germany, France and Italy. Our unemployment rate is well below the European Union average and, unlike most other member states, it is falling. This demonstrates the advantages of a flexible labour market with low overheads, which the Labour party would destroy by signing up to the social chapter and introducing a minimum wage.

Mr. Arnold

Did not slavish adherence to the social chapter by the socialist Government in Spain lead to one third of young people being without jobs, and to destruction and defeat in the recent Spanish general election? What would my right hon. and learned Friend say to those first world war-style generals who would take Britain down the same path—the so-called new Labour party?

Mr. Clarke

My hon. Friend is quite right. The Government have been fighting this battle for 10 years and the results are now beginning to show—compared with those who have the social chapter—particularly in relation to youth unemployment. If we ever had a Labour Government, they would be striving to add overheads to the cost of employing people and would thus destroy jobs. The rest of western Europe wants to emulate us and to start to remove those overheads.

Mr. Devlin

While the unemployment figures in Britain are decreasing, which is a great pleasure to us all, one of the concerns in my constituency is the continuing difficulty of young people finding jobs. Is not youth unemployment in other major European countries considerably higher than it is in Britain? Will the Minister give hon. Members some figures, so that they can compare the success of the British economy with other economies?

Mr. Clarke

Our rate of youth unemployment is below the European average. Youth unemployment is 38.2 per cent. in Spain, 26.5 per cent. in Italy and 27.7 per cent. in France. We well remember that the French Government tried to reduce the minimum wage for young people because they knew that it was causing the unemployment. It is a matter of grave concern that young people in my hon. Friend's constituency are still having difficulty getting jobs, but the Labour party would destroy the jobs that some of those young people already have.

Dr. Bray

The Chancellor is putting the best face that he can on the economy in time for the general election, without much help from Conservative Back Benchers. Is he aware that the figures that he is quoting are short-term and cyclical? Is he satisfied that underlying investment in the economy is sufficient to maintain competitiveness?

Mr. Clarke

The circumstances for investment are very good indeed, as evidenced by the present state of company balance sheets, enhanced profitability and the prospects of rapidly growing consumer demand. The hon. Gentleman was in the Chamber on Monday; he knows that Conservative Back Benchers share that confidence, as does the business community in this country. The economy is growing and poised to grow faster. This is not just pre-election—the general election is some way away, but the economy will carry on improving all the way from now to the election, as it has done well in the recovery of the past two or three years.

Mr. Malcolm Bruce

Does the Chancellor of the Exchequer accept that in tackling growth the key integers of interest rates and inflation are crucial? When the Chancellor meets the Governor of the Bank of England later this afternoon, how will he balance the needs of the two parts of the economy—the industrial sector, which desperately needs an interest rate cut to stimulate investment, and the consumer sector, which the Chancellor says is facing a strong boom? How can he ensure that he gets the balance right without triggering an upsurge in inflation?

Mr. Clarke

Throughout this recovery, we have had a tale of two economies in this country, with, until recently, manufacturing and exports booming and construction and the retail sector lagging behind. At the moment, as this morning's figures from the Confederation of British Industry survey of the distributive trades show, prospects for the retail sector are extremely good. Manufacturing slowed down at the end of last year, but people remain confident.

The Governor and I will do our usual weighing of the evidence. The hon. Gentleman must read past minutes to see how we do it. We shall continue to concentrate on our task, and we shall not waste much time congratulating ourselves on our remarkable achievement so far—with the best record of sustained low inflation that the country has had for more than half a century.

Mr. Quentin Davies

The whole House is familiar with the fact that the German economy has enjoyed enormous advantages for a long time as a result of Germany's remarkable monetary stability, but it also knows that Germany has imposed great handicaps on itself by its social and labour policies. In that context, I wonder whether my right hon. and learned Friend noticed the comments of Hans-Olaf Henkel, head of the Bundesverband der Deutschen Industrie, to The Daily Telegraph recently. He said: We"— the German— have too rigid labour laws. We have too high social costs and taxes. We work the shortest working week in Europe. The German Government spends 50 per cent. of GDP, as opposed to 42 per cent. in Britain. No wonder we have a problem.

Madam Speaker

Order. Quoting at Question Time is not allowed. The hon. Gentleman should have paraphrased. I am sure that the Chancellor has got the message.

Mr. Davies

I was trying to ensure that I got it right. Does my right hon. and learned Friend believe that it would be a good idea for us to introduce similar problems into this country?

Mr. Clarke

I will take the quotation as my hon. Friend's own words as he and I have argued that case often enough and the present position demonstrates that we are right. German unemployment is more than 4 million; ours is coming down towards 2 million. We are creating new jobs in this country; Germany had a negative quarter of growth at the end of the last year and unemployment is increasing yet again.

In Germany, people know that; people know that in the German industrial community. Throughout western Europe, people know that they must have a flexible labour market of the type that we have here. The old-fashioned party opposite is the only party that does not know and solemnly promises to bring to this country precisely the conditions that people are suffering from in Germany.

Mr. Andrew Smith

Why, then, does Britain have the worst record of job generation of any major industrial country since 1979? Moreover, when job insecurity is rife, when 8.5 million people have suffered a spell of unemployment since the general election and when we have 600,000 young people out of work, is not the Chancellor guilty of irresponsible complacency now to abandon the community action programme?

Why is the community action programme being abandoned? What has the right hon. and learned Gentleman to say to the 40,000 people who, just a year ago, he was boasting would have places on it?

Mr. Clarke

The hon. Gentleman's eloquent question slipped in "since 1979" in order to obtain a comparison; in doing so, it takes advantage of the recession, which the Labour Government caused and which they left to us as their legacy. As we argued on Monday, the figures from 1981 show that our record on growth and employment creation matches the best—it has certainly done so in the past few years. Unemployment has fallen for 29 months in succession.

The Labour party's so-called jobs strategy seems to concentrate on one scheme, which has been wound up by the Department for Education and Employment. Unemployment has fallen while we have readjusted the schemes. That particular scheme was quite small—I believe that it had 30,000 places—whereas the one-to-one scheme, which is prominent in the plans of the Department for Education and Employment, involves 100,000 opportunities for getting people back to work in a growing economy.

Mr. John Townend

Does my right hon. and learned Friend agree that the excellent British performance on unemployment and growth is not due entirely to the magnificent economic management of the Treasury, but also to the fact that many of our friends in the European Union are still members of the exchange rate mechanism and are operating their economies to enable them to join a single currency rather than looking to the needs of their own economies? That is particularly true of France.

Mr. Clarke

In so far as those countries are pursuing the convergence criteria, if they can achieve low inflation and healthy public finances of the sort that we are achieving, that will enhance their performance and create jobs. Their exchange rates are set by the markets, like anyone else's.