Economic Activity (Hansard, 23 April 1998)

§ 1. Mr. Dale Campbell-Savours (Workington)
When he last met representatives of the Confederation of British Industry to discuss matters relating to activity levels in the economy. [38241]

§ The Chancellor of the Exchequer (Mr. Gordon Brown)
Yesterday, I met representatives of the Confederation of British Industry and explained the five building blocks in our economic approach: monetary stability, sustainable public finances, good trading relationships, including constructive engagement with Europe, encouraging and rewarding work and improving British productivity.

§ Mr. Campbell-Savours
Is it true that the CBI is forecasting in the current year a 3.25 to 3.5 per cent. increase in exports and a substantially greater figure next year of nearly 5 per cent. in exports? If that is true, does it suggest that the indicators are contradictory on the problem of the exchange rate?

§ Mr. Brown
It is true that the CBI is predicting a 3 per cent. rise in exports and a 4.8 per cent. rise in the year after. It is also true that it is predicting a 1.3 per cent. rise in manufacturing and a doubling of that in the year after that. The Government will pursue the long-term strategy that is necessary to achieve stability. We will not return to the stop-go, boom-bust years which we saw under the Conservatives.

§ Mr. Malcolm Bruce (Gordon)
Will the Chancellor acknowledge that, a few years ago, manufacturing industry was growing at around 4 per cent. and at least this year many commentators suggest that there will be a fall? When will the right hon. Gentleman set a clear timetable for British membership of the single currency on the ground that it will help to eliminate the very boom and bust that industry is facing and that he is so keen to squeeze out of the economy?

§ Mr. Brown
The worst thing that any Government can do is to react to short-term conditions by making a 950 long-term decision for the future of our country purely to get out of a short-term position. We have set down our policy. We have made a principled commitment to economic and monetary union. We have said that there is no constitutional barrier to joining, and we have already started making preparations to do so. We have said that, subject to a referendum of the people, we will consider making a decision early in the next Parliament. That is the right decision for Britain.

§ Mr. Peter Lilley (Hitchin and Harpenden)
Does the Chancellor accept that the best way to ensure balanced and moderate growth in activity is to encourage savings? Does he also recognise that the worst way to encourage savings was to attack existing savings schemes and impose a £5 billion a year tax on pension funds?

§ Mr. Brown
I do not accept what the right hon. Gentleman said. The biggest potential attack on savings was the pensions policy pursued by the right hon. Gentleman before the general election. We are creating the climate in which savings and investment for the long term will be made. We are creating economic stability in this country, which is the best climate for savings and investment. We have reduced the deficit from £23 billion to £3 billion this year—a substantial reduction—with sustainable public finances for the long term. We are taking measures such as the introduction of the individual savings account to encourage savings in our country. It is the Conservative party's policies that would destroy investment and savings.

§ Mr. Lilley
How then does the Chancellor explain that in his Red Book he is forecasting that the savings ratio will decline over the coming year? He has said that he is against boom and bust. Whatever he says, we have the onset of a recession in manufacturing, at least before the end of this year. Is he not the first Chancellor to have given us boom and bust simultaneously with bust in manufacturing and booming services?

§ Mr. Brown
The right hon. Gentleman is now trying to rewrite the laws of economic arithmetic, and I suspect that I know why: he wants us to forget the position in the late 1980s when the savings ratio was negative and the Conservative party created a situation in which there were 15 per cent. interest rates, 10 per cent. inflation and 11 per cent. wage rises. We are not going to return to that. Judging from the policies that the right hon. Gentleman wants to pursue, it seems that he has learnt nothing and remembered nothing.

§ Ms Diane Abbott (Hackney, North and Stoke Newington)
Is the Chancellor aware that we all admire his fixity of purpose, but that there is concern about the welfare-to-work programme in my constituency, which has the highest unemployment in the south-east? The programme is the flagship of the Government, and if divesting monetary policy to the Bank of England, as he has done, were to lead us into recession, would that not make it very difficult for the welfare-to-work programme to deliver?

§ Mr. Brown
The welfare-to-work programme is already delivering. It is creating conditions in which every young person who has been unemployed for more than 951 six months has new opportunities for work and training. Instead of sneering, it would be better if the Conservative party started supporting the welfare-to-work programme.
As for monetary policy, we have made the right decision for the long term. That is one of the reasons that long-term interest rates in this country are now the lowest they have been for 33 years.