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Economy
11. Mr. Clifton-Brown: To ask the Chancellor of the Exchequer what assessment he has made of the findings of the Organisation for Economic Co-operation and Development report on the state of the British economy. [33416]
Mr. Waldegrave: The recent OECD report on the British economy confirmed and endorsed the success of the Government's economic policies across a broad front. The OECD expects the economy to continue growing at a healthy rate, with low inflation and falling unemployment.
Mr. Clifton-Brown: Has my right hon. Friend had an opportunity to evaluate the OECD report of 1979, and has he compared that with the report this year? Does not such a comparison show that in the intervening 17 years of Conservative Government, almost every economic indicator has improved substantially? Have not living standards improved substantially in that time? Is it not self-evident that if living standards are to double in the next 25 years, as is the Prime Minister's wish, we must have a Conservative Government for the next 25 years?
Mr. Waldegrave: My hon. Friend is absolutely right. No one would have dared to make such a well-founded pledge, as my right hon. Friend the Prime Minister has, in 1979 when, as the report shows, the economy was in collapse. You would rebuke me, Madam Speaker, if I read much of the report, but I remind the House that the OECD said:
- "By the end of 1978, British external competitiveness was at its worst level since 1966"--
Mr. Gapes: Can the Minister confirm that in 1979 approximately half the number of people were out of work than is the case today? Can he confirm that five years ago, the work force in this country was 26 million, but that today, it is only 25 million?
Mr. Waldegrave: There are more people in work now than there were then--[Hon. Members: "No."] I believe that that is correct; I shall write to the hon. Gentleman if I am not correct. Much more fundamental is the point that the economies on the continent of Europe that have followed the advice of the hon. Gentleman and his Front-Bench colleagues since 1979 have had a far worse unemployment record during those difficult years than we have. That is the point. What matters is the future. Who is better now? We are better than the social democrat countries. Who will be better in future? The Conservative answer brings low unemployment; the Opposition's brings high unemployment.
Mr. Congdon: Does my right hon. Friend agree that one of the key factors in the improvement in the competitiveness of the British economy has been the success in controlling inflation? Does he also agree that
that success would be put at risk if we allowed wage rates to rise by caving in to disputes in the public sector, whether in the Post Office or on the tube, or if we introduced a minimum wage which would put up employers' costs and feed through into inflation? Would it not be a disaster to let either of those things occur?
Mr. Waldegrave: The 1979 report described truthfully the disastrous state of British labour relations. The Labour party should be called on clearly to condemn today's unnecessary strike on the underground system because sensible mediation is on offer from the employers. I suspect that it will not do so because many Labour Members are sponsored by the relevant unions.
Mr. Darling: Given that the OECD has said that the British Government's deficit is the second highest in the G7, has the Chief Secretary any confidence that the Government will meet their borrowing target this year, when they have missed the target in each of the past four years?
Mr. Waldegrave: The public sector borrowing requirement is on a steady downward trend; there is nothing wrong with the public finances of this country. The hon. Gentleman would have a greater right to criticise if at any time in the past few years he had given an opinion on whether tax should be higher or lower and on whether interest rates should be higher or lower, or if he had given any other opinion on the management of the economy. The right hon. Member for Dunfermline, East (Mr. Brown), who is unable to be with us today because of Scottish problems, has never given advice on those issues.
Government Spending
12. Mr. Colvin: To ask the Chancellor of the Exchequer what is his latest percentage target for cuts in overall Government spending for the financial year 1997-98. [33417]
Mr. Waldegrave: Our plans are to hold overall public expenditure in 1997-98 at the same level in real terms as it was in 1995-96. The Government's target is to reduce general Government expenditure as a share of national income to below 40 per cent., and to reduce it further if possible.
Mr. Colvin: Will my right hon. Friend note that defence expenditure is a lower proportion of general expenditure than it has been previously? Has he studied the defence White Paper which shows that, in real terms, expenditure on defence for the three years from now will remain more or less constant? Those figures are based on an underspend last year of £500 million and, therefore, represent cuts. Can my right hon. Friend assure us that the Treasury regards the defence of the realm as the first duty of any Government? Will he ensure that funds are made available to our overstretched armed forces to improve recruiting and to give them the equipment they require to carry out their extremely difficult task?
Mr. Waldegrave: I pay tribute to the way in which the armed forces and my right hon. Friends in the Ministry of Defence have reshaped the forces after the end of the cold
war to ensure that that first duty is properly met. I can give my hon. Friend the assurance that no Conservative Government will take risks in that area.
Mr. Soley: What estimate has the Minister made of the increased spending required for bovine spongiform encephalopathy payments?
Mr. Waldegrave: The best estimate that I can give the hon. Gentleman on BSE is that additional spending this year will be around £1 billion, gross spending over the next three years might be around £2.5 billion, or around £2 billion net of predictable receipts from the European Union.
Interest Rates
13. Sir Michael Shersby: To ask the Chancellor of the Exchequer what has been the effect on the average mortgage payment of recent reductions in interest rates. [33418]
Mr. Heathcoat-Amory: The cuts in mortgage rates over the past year will leave the average mortgage payer about £400 a year better off.
Sir Michael Shersby: Does my hon. Friend agree that average mortgage payments are now about £107 a month lower than they were in October 1990--even allowing for mortgage interest relief at source--that the affordability index is now excellent, particularly for first-time buyers and that there is strong evidence that they are coming back into the market in large numbers?
Mr. Heathcoat-Amory: Yes, my hon. Friend is spot on. House prices are relatively low compared with average earnings, so property is a good buy. Meanwhile, the four interest rates cuts since the Budget have been followed by mortgage interest reductions. That is good news for millions of borrowers and has helped to continue the steady increase that is fully sustainable in house prices.
Mr. Chisholm: In spite of the fact that our interest rates are higher than those in any G7 country apart from Italy and that the City expects interest rates to rise in the next year, is it not the case that interest rates have not fallen in order to help mortgage payers, but because of fundamental weaknesses in the economy with manufacturing in recession and manufacturing investment in decline?
Mr. Heathcoat-Amory: The hon. Gentleman may be disappointed that the British economy is now performing extremely well by international and historic standards. Mortgage interest rates are now below 7 per cent.--the lowest level for about 30 years--compared with a rate of more than 11 per cent. under the last Labour Government.
Mr. Bernard Jenkin: May I congratulate my right hon. Friend on his success in reducing interest rates? Does he agree that that is best achieved by applying a national monetary policy to national economic conditions and making sure that we have a balanced economic framework to produce the best outlook for a generation?
Mr. Heathcoat-Amory: I agree that it is an impressive achievement in monetary policy. My hon. Friend also knows that we have no immediate plans to transfer monetary policy to anyone other than the Treasury.
Manufacturing Output
14. Mr. Rooker: To ask the Chancellor of the Exchequer what fiscal proposals he has to stimulate manufacturing output. [33419]
Mr. Jack: All businesses will benefit from the tax cuts in the Budget and the four interest rates cuts announced since last December.
Mr. Rooker: Does the Minister accept that Britain should be first and foremost a manufacturing nation? Notwithstanding contributions to the economy from other sectors, is it not a tragedy that our manufacturing base contributes less to the economy than financial services? Is it not the case that although manufacturing industry does not exist to create jobs, it must create wealth and we are slipping too far behind?
Mr. Jack: In reply to the hon. Gentleman's first question--what a contemptuous statement on all those who work in the City, banking and other financial institutions and who generate so much of our invisible wealth. However, I share the hon. Gentleman's enthusiasm for manufacturing industry. It is a pity that he did not mention Rockwell Light Vehicle Systems which has invested £7.9 million in the west midlands, Everset Frozen Food, an American company which has invested £28 million there and Mann and Hummel, a company that makes air filters, which has invested £13 million in the west midlands. Nor did he mention the 58 German companies fleeing the social chapter to invest in manufacturing in the best place in Europe to make things.
Mr. Forman: Is my hon. Friend aware that it is not so much special fiscal measures, but the right overall economic climate, with low interest rates, low inflation and minimum regulation that is necessary to support our manufacturing?
Mr. Jack: My hon. Friend is entirely right. The flexibilities in the British labour force and the excellence and strength of our economic policies have made us attractive and the number one place for inward investment in Europe.
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