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Part of Oral Answers to Questions — Overseas Development – in the House of Commons at 12:00 am on 19th March 1979.

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Photo of Mr Nigel Lawson Mr Nigel Lawson , Blaby 12:00 am, 19th March 1979

It would be only courteous to begin by thanking the General Sub-Committee of the Expenditure Committee for producing once again a most useful report on the public expenditure White Paper, containing some trenchant and well-merited criticism of the Chief Secretary—who seemed unusually sensitive when he opened the debate at somewhat inordinate length.

We have had contributions by a number of members of that Sub-Committee, including outstanding contributions from my hon. Friends the Members for Hitchin (Mr. Stewart) and for Cirencester and Tewkesbury (Mr. Ridley), both of whom emphasised the great importance of trying to bring both sides of the Budget together—expenditure and revenue. I hope that it is taken as no particular criticism of this debate if I say that I think that it would have been a better debate, and a better attended one, had we been able by our procedures to achieve that.

We had a characteristic contribution from the Chairman of the Sub-Committee—the hon. Member for Nottingham, West (Mr. English)—and a somewhat abbreviated contribution from the hon. Member for Norwich, South (Mr. Garrett), who might have done better had his contribution been even more abbreviated.

The motion before the House seeks approval for what is described as the Government's policy of planning for an improvement in public services in line with what the economy can sustain ". Despite the pre-election atmosphere in which this debate is being held—I am not surprised that hon. Members opposite are a little frightened of the word"election "—I begin by trying to find the greatest possible degree of common ground between the Opposition and the Government. We welcome the recognition, explicitly spelt out in the motion, that the level of public services must in the long run depend—and, despite Keynes, it is the long run that matters—on the level of output in the economy as a whole.

So the prime concern of those of us who genuinely wish to see an improvement in the public services—that means all of us on this side of the House as well as Labour Members—must be to pursue policies that will stimulate a higher level of output in the economy as a whole. That must come first, and everything else must be secondary.

The prospect that is now before us could scarcely be worse. Manufacturing output, which is of special concern to the Government and their so-called industrial strategy, is now at the lowest level for a decade and 10 per cent. below the level in the three-day week. I know that the position was affected in January by strikes, but that also occurred at the time of the three-day week. Therefore, the comparison is wholly fair.

Or let us take an authoritative source close to the Government—namely, the Bank of England, whose judgment the Chancellor is widely believed to respect rather more than he does the judgment of the Treasury. As my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) reminded us, in its latest Quarterly Bulletin the bank says: Now condemned to very slow growth, we might later even have to accept, if present trends continue, declines in real living standards. These present trends, which point to a future far worse than the British people at present realise, and infinitely worse than either the Chancellor of the Exchequer or the Prime Minister have ever had the courage to admit, have arisen entirely during the lifetime of the present Government and largely as a direct result of the policies of the present Government.

This emerges clearly from a table published in the same Bank of England Quarterly Bulletin. That table showed that manufacturing productivity, the biggest single key to our prosperity in the future, rose between 1960 and 1973 at an average annual rate of 3½ per cent., whereas during the five years of the present Government the annual increase, as my right hon. and learned Friend pointed out, has been a mere ½ per cent. Of course, there has been a fall in the growth of productivity throughout the industrialised world since the oil crisis of 1973. But the fact is that nowhere has that fall been anything like as catastrophic as in this country under a Labour Government.

The bank's table shows the figures for the seven major industrialised countries in the world on a fully comparable basis. This compares the annual growth of manufacturing productivity from 1973 to 1978 with the rate of growth between 1960 and 1973. In Canada the fall amounted to 20 per cent. of the previous rate; in Germany, 34 per cent.; in the United States, 35 per cent.; in France, 52 per cent.; in Japan, 56 per cent.; in Italy, 73 per cent.; and in the United Kingdom there was a fall of 83 per cent. compared with the previous level of productivity—itself not high by international standards. That is the harsh reality of Britain's economic performance under Labour. It is the key to what we can afford by way of public expenditure.

How, then, are we to reverse this headlong descent into poverty and penury? This is the only context in which public expenditure can sensibly be discussed. To discuss it as some hon. Members on the Government Benches have done, as if it were a question of political levitation rather than economic reality, is the sheerest fantasy. As we say clearly and categorically in our amendment, a central and essential requirement of economic recovery is that there should be a substantial cut at all levels in the burden of income tax. It is no use the Chief Secretary protesting, as he did this afternoon, that significant income tax cuts will have to await an improvement in our industrial performance. There will not be an improvement in our industrial performance until income tax is cut.