The Economy (Hansard, 10 July 1997)

§ Lord Peyton of Yeovil
asked Her Majesty's Government:
What opinions on the current state of the British economy the Prime Minister expressed during the European Union meeting in Amsterdam and the G8 meeting in the United States.

§ Lord McIntosh of Haringey
My Lords, the Prime Minister put jobs at the top of the agenda at both the European Council meeting in Amsterdam and the G8 Summit in Denver, along with British ideas on competitiveness, flexible labour markets and employability. The Government intend to make the creation of real and lasting jobs a key theme of Britain's own presidency of the G8 and the European Union next year.

§ Lord Peyton of Yeovil
My Lords, I had rather expected—or hoped for—an Answer overflowing with useful and new information. There is some disappointment. Is the Minister aware that there had been a vague hope that his right honourable friend might feel able (in private conversation, of course) to express to his G8 colleagues his confidence in the economy which is so robust as to be able to withstand the adverse blows of a disappointing and rather damaging Budget?

§ Lord McIntosh of Haringey
My Lords, the noble Lord asked a very specific Question about the opinions 723 the Prime Minister expressed. I am not aware that he made any specific comments on the record about the UK economy at either of the gatherings. Therefore, my Answer went well beyond his extremely limited Question. As the noble Lord suggests, the Government's policy is to have an economy which is stable and which provides low inflation and high growth, but it is by no means certain that we inherited an economy which was moving in that direction. Under the previous government we had the two longest and deepest recessions since the war. Britain had a growth rate below that of every other major industrial country. We had high unemployment, admittedly declining, but it was still above 2 million on the internationally accepted level. We had low productivity, lower than other major industrial countries, and weak public finances with a history of large public debt deficits with a steeply rising burden of public debt.

§ Lord Jenkins of Hillhead
My Lords, is the Minister aware that although it is possible that the present Government have inherited a rather better position than perhaps any incoming government since 1970, the position is a little more mixed than the noble Lord, Lord Peyton of Yeovil, indicated because the inflationary position is not quite as good as it looked: the public expenditure position is quite difficult; the balance of payments position is not bad and growth is quite strong, but is verging on overheating? It is not a bad position to be in; but it is not a great one, either.

§ Lord McIntosh of Haringey
My Lords, I readily accept the force of the noble Lord's comments about the year 1970. As far as 1997 is concerned—which I suspect is what most noble Lords are interested in—comment seems to have concentrated on the undoubtedly successful management of the economy in the last months of Mr. Clarke's Chancellorship. What I hope to show by my answers is that that by no means represents a rosy picture for the British economy.

§ Lord Barnett
My Lords, we all know that the noble Lord, Lord Peyton, is a stickler for maximum information and correctness—indeed, he was almost the same when he was a Minister. But perhaps I may help the noble Lord and the House (and perhaps myself) by asking my noble friend whether, when the Prime Minister was addressing his colleagues, he referred to the question of interest rates and the forecasts made by the previous six economic advisers to the former Chancellor who had forecast that interest rates would be in a range between 5.8 per cent. and 7.8 per cent. by the end of this year. Can my noble friend also tell us which of those forecasts my right honourable friend the Chancellor used in his forecasts?

§ Lord McIntosh of Haringey
My Lords, I do not think that I shall rise to the last question, but my noble friend's claims are right. The point that should be made about interest rates is that the policies of this Government have in a very short period caused a decline in long-term interest rates. Indeed, long-term interest rates are now nearly half a per cent. lower than they 724 were. That cuts the government debt service, improves long-term investment and proves that the reforms that this Government have introduced have improved the credibility of government finances.

§ Lord Campbell of Alloway
My Lords, the Minister rightly said that the Prime Minister has not yet pronounced upon the economy. May I respectfully ask him this: is it not about time that he did so, with inflation beginning to rise, the strong pound crippling our export industry and other aspects of which all noble Lords in this House are well aware?

§ Lord McIntosh of Haringey
My Lords, I am not sure that I know what the Prime Minister is going to say about the economy, but I know that this afternoon the Chancellor of the Exchequer is responding to Questions about the interest rate rise announced by the Bank of England this morning. He will be saying that the Bank of England has agreed with him that we should prevent a return to the cycle of boom and bust and inflationary pressures on the economy which, despite persistent warnings, the previous Government failed to tackle and which must now be brought under control.

§ Lord Mackay of Ardbrecknish
My Lords, can the Minister assure us that the Prime Minister's opinions were delivered more quickly than the noble Lord's original Answer to the House this afternoon? How does the creation of jobs square with the Budget which has put up inflation, and which will put up inflation by 0.8 per cent. of 1 per cent? And how does it square with another one quarter per cent. increase in interest rates, all of which will have adverse effects on jobs and job creation?

§ Lord McIntosh of Haringey
My Lords, I am not sure that I have ever been criticised before for speaking too slowly. I had always thought that it was the other way around. The point about the Budget—this is recognised and agreed by the Bank of England, as the noble Lord will see if he reads its press release of this afternoon—is that the Bank agrees that the Budget has had a contractionary effect, but it believes that further adjustment is required. I should point out that there is a difference between short-term changes in interest rates and fine tuning the economy, which is the responsibility of the Bank of England, and the long-term strategy for reducing the fiscal deficit to rebalance the economy, which is the responsibility of the Government.

§ Lord Peyton of Yeovil
My Lords, I return to the second answer which the Minister was good enough to give me. Will the noble Lord accept our sympathy that someone should have inserted into his papers—obviously unknown to him—a copy of one of the speeches that he made during the election campaign?