HL Deb 09 December 1993 vol 550 cc1021-3

3.25 p.m.

Lord Barnett asked Her Majesty's Government:

In light of the changes that the Chancellor of the Exchequer has made in his Budget, what further assumptions he has made to that of paragraph 2.11 of the Financial Statement and Budget Report 1994–95 (the Red Book) and of the Treasury's panel of independent forecasters that growth over the medium term will average around 3 per cent.

The Minister of State, Department of Transport (The Earl of Caithness)

My Lords, the projection for medium-term growth averaging around 3 per cent. takes account of the measures which my right honourable friend the Chancellor of the Exchequer announced in his Budget.

Lord Barnett

My Lords, on the assumptions in the Red Book, does not the Chancellor of the Exchequer deserve congratulations for, among his other attributes, being the magician of the year? He seems to have suspended the normal laws of economics. Together with his predecessor he will cut £12 billion out of the economy next year and yet the noble Earl is saying that he expects still to achieve growth, in the medium term, of 3 per cent. Does the Minister agree with the Chief Economic Adviser to the Treasury, Alan Budd, who, before the Treasury Select Committee on Tuesday, said that he expected some slow down—at least a pause—in the rate of economic growth? Is that why unemployment is shown in the Red Book as being, over the whole of the medium term, 2.75 million?

The Earl of Caithness

My Lords, I agree with the noble Lord, Lord Barnett, that my right honourable friend the Chancellor of the Exchequer deserves considerable credit for his Budget. I thank the noble Lord for his support. Although the noble Lord, Lord Barnett, is discussing the economy, he is talking about two different things. Mr. Budd was referring to a short-term period of time in the economy, which is not the same as the medium-term programme set out in paragraph 2.11 of the Red Book.

Lord Desai

My Lords, as the Government normally say that the economy manages on its own and that government cannot create jobs or growth, how does the Minister reconcile the fact that it is now said that the Budget will raise the long-term rate of economic growth of the economy beyond anything that we have seen over the past 50 years?

The Earl of Caithness

My Lords, the medium-term forecast spells out the growth that is anticipated. As the noble Lord is aware, a number of factors are likely to occur after a recession. Growth is likely to come from the highly competitive position in which we now find ourselves; the low interest rates; and the recovery in demand from our trading partners will also boost exports.

Lord Peston

My Lords, is the noble Earl aware that the average growth rate of the British economy since 1979 has been 1.6 per cent. per annum, during which period the noble Lords, Lord Lawson and Lord Howe, were Chancellor, followed by the right honourable gentlemen Mr. Major and Mr. Lamont? Can the Minister point to anything that has happened in the past few weeks or months that would cause us to believe that any change in the 1.6 per cent. is likely to occur?

The Earl of Caithness

My Lords, perhaps the noble Lord would like to read the Red Book.

Lord Peston

My Lords, I know that it is late in the year, but perhaps occasionally the Minister could try to answer a Treasury question. I have read the Red Book and, perhaps with the exception of the noble Lord, Lord Barnett, I am one of the few to have done so. It is one of the few things that I do read. It is a serious question. It is a matter for business. Business plans on the basis of what it thinks will happen to the economy. Why should any businessman, when making his investment plans, think the future will be any different from the past 14 years' performance of this Government?

The Earl of Caithness

My Lords, I cannot answer for the businessman who interprets the forecasts put before him. As the noble Lord will be aware, in paragraph 2.11—he doubtless has the Red Book with him—the main fiscal projections are based on the illustrative part of the economy shown in Table 2.1. It is up to people to interpret that as they wish.

Lord Barnett

My Lords, is the Minister really saying that under paragraph 2.11—I have read the little Red Book of 143 pages—the medium-term growth rate will be 3 per cent.? Despite that, is he telling your Lordships that unemployment will remain at 2.75 million right the way through the medium term without any positive action by the Government?

The Earl of Caithness

My Lords, the Government are taking a lot of action, a good deal of which was discussed on the previous Question.

Lord Barnett

My Lords, with respect, that is not an answer. We are told in the Red Book that throughout the whole of the medium term, almost to the end of the century, the assumption is that unemployment will remain at 2.75 million. Taking the point of my noble friend Lord Peston, in those circumstances, who will invest?

The Earl of Caithness

My Lords, the noble Lord will know that when we make assumptions with regard to the Budget we take the unemployment figure as it is at the moment. We look at other figures as well. We hope that unemployment will go down. A lot of measures are being taken to reduce unemployment, as was mentioned in the previous Question.

Lord Richard

My Lords, I am not one of those in the House who is economically, politically literate, but do I understand from the Minister's last answer that, although the Red Book says 2.75 million for the medium term, we should not think that the figure will be 2.75 million for the medium term because the Government will do things to bring it down from 2.75 million in the medium term? Can he tell us what they are going to do to bring it down?

The Earl of Caithness

No, my Lords. I hope that the noble Lord will believe in the Red Book.