§ 2. Mr. CongdonTo ask the Chancellor of the Exchequer what assessment he has made of the factors, with special reference to fiscal and monetary factors, which have contributed to the United Kingdom's fall in unemployment since its peak. [4857]
§ The Chancellor of the Exchequer (Mr. Kenneth Clarke)Sound public finances, low inflation and low interest rates have helped unemployment to fall to its lowest rate for more than five and a half years. My Budget will ensure that it continues to fall.
§ Mr. CongdonDoes my right hon. and learned Friend agree that our success in reducing unemployment is in sharp contrast to the record of France and Germany? Does that not show conclusively that we would be foolish to sign up voluntarily to the social chapter, which would impose additional costs on companies, and that we should continue to resist any attempt by our European partners to impose their sorts of social costs on Britain, whether by the front door or the back door?
§ Mr. ClarkeI agree entirely. Even when the other continental countries achieve better rates of economic growth, their experience tends to be that that growth does not create jobs as it does in this country. That is because they are over-regulated, they have inflexible labour markets and the costs of employment are far too high. It is therefore extremely important that we should repudiate the social chapter. That sentiment is shared by large numbers of German, French, Dutch and other industrialists. It is quite extraordinary that the British Labour party continues to advocate a turn towards that approach to employment, when the business community in the rest of the continent is hoping to get away from it.
§ Mr. Malcolm BruceIn view of the need to keep down unemployment and sustain that reduction, is the Chancellor prepared to contemplate an increase in interest rates, if that is recommended by the Governor of the Bank of England at their next meeting? How does he think the unemployed and those on low incomes are helped by the continuing increase in indirect taxes, given that they do not benefit from the reduction in direct taxation?
§ Mr. ClarkeFirst, interest rates sometimes go down and sometimes go up. I shall set interest rates at whatever level is necessary to achieve the inflation target, which is important to keep our present healthy recovery on a sustained course for many years to come.
On the hon. Gentleman's second point, one of the most significant changes that I have made in the Budget is to raise the thresholds for income tax, which measures have taken about 400,000 people out of tax altogether since the last election.
§ Mr. EvennettWill my right hon. and learned Friend confirm that low inflation is absolutely essential for future economic prosperity and that it is only Conservative Members who believe in low inflation, because high inflation destroys jobs and destroys people's incomes?
§ Mr. ClarkeWe believe in it, we are delivering it and the present experience of living in a low-inflation economy is the best that the British people have had for 50 years. To put that at risk now by going back to Labour Governments—who habitually and frequently had inflation rates going into double figures during their terms of office—would be a disaster for this country.
§ Mr. MilburnIs not the reason why the Chancellor has put up taxes 22 times since the last general election that 448 he has failed to tackle the real level of unemployment, where one in five households of working age have no breadwinner? Will he confirm that his tax-raising Budget means that the typical family will pay an extra £2,120 in tax by the time of the next election?
§ Mr. ClarkeThat is a ridiculous choice of figures to give as the background to a Budget that stimulates further the expected rise in living standards of the ordinary people of this country because the economy is doing so well and because we have returned to our tax-cutting agenda and lowered income tax. That £2,000 figure is apparently some cumulative, rolled-up calculation of the difference between tax paid and what tax would have been if it had not been indexed, and it also takes account of the fact that earnings are going up.
What is happening in this country is that more people are working, more people are unemployed—[Interruption.] If the Opposition believe that, the figures get even sillier. More people are working, fewer people are unemployed, they are earning more and their earnings are worth more. The Labour party is then astonished to find that some people are therefore paying more tax. They are paying more tax because they are better off—their earnings are higher and the average family is £100 a week better off since 1979.
§ Mr. Duncan SmithDoes my right hon. and learned Friend agree that it is quite ridiculous that Spain. whose natural non-wage costs should be low because of its historical position, now finds that its non-wage costs and the overall cost of employing a worker are almost as high as those of Germany, even though Spanish productivity is nowhere near as high? Does that not demonstrate that the policies that Spain followed under previous socialist governments are exactly what that lot over there would have done?
§ Mr. ClarkeI do not think I would upset many of my Spanish friends—I am very fond of Spain—by saying that the Spanish have one of the most inflexible and over-regulated labour markets in western Europe and they suffer for it. I believe that the rate of youth unemployment in Spain is more than 30 per cent., which is appalling. More than 30 per cent. of the Spanish work force are on short-term contracts, trying to avoid certain labour regulations that go beyond even the social chapter, which itself causes great damage to employment prospects in Spain, as it does across the rest of the continent.