Unemployment: Government Assumptions (Hansard, 29 March 1994)

§ The Parliamentary Under-Secretary of State, Department of Employment (Lord Henley)
My Lords, the Government do not publish forecasts of unemployment. Government policies are directed at achieving sustained economic growth, low levels of unemployment and low inflation.

§ Lord Barnett
My Lords, I did not ask for a forecast: I asked for an estimate, which the Government have given in the Red Book to the year 1999. In the final three years of that period the Government have assumed an annual rate of growth of 3 per cent. Does the noble Lord agree that that rate of growth would not substantially reduce the level of unemployment below 2 million? In those circumstances, does not he think it right that the Government should go for higher levels of growth so that those sadly high levels of unemployment do not persist?

§ Lord Henley
My Lords, I think the noble Lord knows perfectly well from his own previous experience that we do not give forecasts, nor do we give estimates. We give assumptions. Those are stylised unemployment assumptions purely for planning purposes and as the noble Lord knows—and as he quite rightly told us—they are set at 2.75 million. That follows the long established convention of setting unemployment assumption flat at around about recent levels.

§ Lord Clark of Kempston
My Lords, does not my noble friend agree that the increase in small businesses over the past few years has increased the number of people who are employed? The recent budgets that have been introduced by my right honourable friend the Chancellor have given tremendous help to small businesses. That, again, is a good thing for the economy. Does my noble friend further agree that if mandatory interest were charged on late payers, that would give a positive cash flow to small businesses and would enable them to expand more rapidly and increase employment?

§ Lord Henley
My Lords, I think my noble friend's second point goes somewhat wide of the Question on the Order Paper. As regards his first point, he is of course absolutely correct. There has been a major change in the types of employment that different people engage in, and particularly in self-employment. The growth in self-employment has certainly replaced some of the jobs that have been lost.

§ Lord Dean of Beswick
My Lords, does not the Minister agree that probably the most important component of the expansion of our economy historically has been manufacturing industry? That ought to be the case now; but is the Minister aware that in January of this year manufacturing industry lost 13,000 jobs in one month and if that occurs during the next 12 months more than 100,000 manufacturing jobs will be lost that will never be replaced? Does not he agree that however many part-time service industry jobs may be provided by small businesses, they will not be as good for the economy as a return to the manufacturing base? In my opinion, this Government have quite wantonly destroyed the manufacturing base.

§ Lord Henley
My Lords, overall, unemployment is coming down. It fell by a further 38,000 last month and it has fallen by some 220,000 since December 1992. As regards manufacturing employment, obviously that is important but I think the noble Lord ought to have pointed out to the House that both productivity and 976 overall production are increasing. The important thing is not the number of people who are employed but what they produce.

§ Lord Elton
My Lords, does my noble friend accept the report of the London economics survey commissioned by the Home Office last year that if the proposals put by the House of Commons into the Sunday Trading Bill are adopted the employment figures will be at least 5,000 worse than they are now?

§ Lord Henley
My Lords, I think that point will probably be better dealt with later on this afternoon.

§ Lord Peston
My Lords, I must say I think that must hold the House of Lords all-comers record for questions wide of that on the Order Paper. To revert to the Question that is on the Order Paper, I agree that the Red Book uses the word "assumptions" but it also uses the word "projections" and indeed goes out of its way to point out that the assumption over the medium term is the average of the projections made by the panel of independent forecasters. One has to ask the Government why they go to some trouble to point that out if they do not want their assumptions to be taken seriously. As all of the fiscal projections are based on these assumptions, with fiscal projections indicating a decline in government borrowing, are we not to take those projections seriously simply because they are based on assumptions?

§ Lord Henley
My Lords, the Red Book makes absolutely clear at paragraph 220 that: There are inevitably uncertainties about medium term prospects". It then goes on to give variant PSBR projections based on variant growth projections. Therefore, for that reason we only make assumptions or projections and we only make forecasts for the immediate year.

§ Lord Peston
My Lords, I do not want to bandy words about assumptions and projections. What we want to know—certainly markets want to know—is what the Government actually believe will happen over the next four or five years. That is the point raised by my noble friend Lord Barnett. It would be helpful to everyone to know what the Government think is likely to happen.

§ Lord Henley
My Lords, we have made quite clear that we do not believe any valid purpose would be served by making projections about levels of employment in the future. We refuse to give such projections for exactly the same reason as the Labour Government—I appreciate that this was a long time ago—of which the noble Lord, Lord Barnett, was such a respected member when he was chief secretary, refused to make projections or predictions of unemployment.

§ Lord Carr of Hadley
My Lords, does my noble friend agree that our experience of forward forecasting tells us that whatever the figure may be in 1999 it will be far different from the figures we are talking about in these projections?

§ Lord Henley
My Lords, my noble friend is absolutely correct. It is very difficult to get these 977 forecasts and predictions right. That is why, for these purposes, and purely for planning purposes in the PSBR, they are merely assumptions.

§ Lord Bonham-Carter
My Lords, did I hear the noble Lord correctly when he replied to the noble Lord, Lord Dean of Beswick, by saying that the number of people employed did not matter? Is that what the party he represents will tell the country?

§ Lord Henley
My Lords, I hope I can assist the noble Lord. What I actually said was that the number of people in employment did not directly matter—what matters is how much they produce. Both production and productivity have increased. At the same time I said that, overall, unemployment has fallen and is continuing to fall.

Viscount Tonypandy
My Lords, will the Minister reconsider his word; because he gave an impression that the number of unemployed people is not important? That figure is important to everyone who does not have a job. 'The Minister ought to phrase his reply differently for his own sake.

§ Lord Henley
My Lords, the noble Viscount, possibly unfairly, has misinterpreted what I said. I would be the first to say that for every unemployed man or woman it represents a tragedy, in particular for those who are long-term unemployed. We are seeing that unemployment is coming down. At the same time long-term unemployment—and that is by far the greater tragedy—is at a far lower level than the remainder of Europe. What is important is that we increase the number of jobs available and get as many people as possible back into work.

§ Lord Barnett
My Lords, the Government constantly claim that the underlying economic position is much improved. If that is the case, why are they not projecting or assuming higher levels of growth in order to bring down those very high levels of unemployment? Is it because of the fear still of inflation and its effect on the balance of payments? Are the Government not then stating that the price is worth paying, even if it means unemployment for more than 2 million people?

§ Lord Henley
My Lords, we are not forecasting or predicting. We make certain assumptions. We then give various illustrative projections depending on different rates of growth. The noble Lord has only to look at chapter 2 of the Budget Red Book—I can refer him to the appropriate graph—to see exactly that.

§ Lord Desai
My Lords, does the noble Lord agree with me that perhaps the best way of bringing down unemployment was the set of policies suggested in his White Paper by M. Jacques Delors, the President of the European Commission? What is the Government's attitude about that programme?

§ Lord Henley
My Lords, the best way of bringing down unemployment is to continue the policies that the Government are pursuing.