The Economy

Part of Orders of the Day — Debate on the Address – in the House of Commons at 3:43 pm on 19th November 1986.

Alert me about debates like this

Photo of Mr Roy Hattersley Mr Roy Hattersley , Birmingham Sparkbrook 3:43 pm, 19th November 1986

I do not know whether I should take next the planted bailing-out questions about councils or whether I should continue on this topic. I shall turn instead to the real issues of today, the collapse of manufacturing industry and the recurring balance of payments crisis—which, like the huge growth in unemployment and the massive increase in poverty, are the direct responsibility of the Government. Indeed, they are part of the Government's economic strategy.

The Government's response to poverty and unemployment is to obscure the extent of their failure by the constant manipulation of the figures. They cannot do that with sterling. A month of bad figures on money supply, borrowing and balance of payments and we would be back into another bout of speculation and depreciation. Of course, the Chancellor's response to that would be another interest rate increase, even though our real interest rate is the highest in the industrialised world and even though the present rate of interest is doing desperate, indeed in some ways mortal, damage to the prospects of British manufacturing industry, as well as imperilling the secure future of home owners by pushing up the price of mortgages.

Bad monthly figures, at least for the balance of payments, are now inevitable. Following the autumn statement forecast, Lloyds bank suggested that the balance of payments deficit under present policies would be £2·6 billion by 1987–88. I chose that figure from the middle of the range. The National Institute of Economic and Social Research predicts a deficit of almost £6 billion. The gradual accumulation of that deficit is bound to be reflected in the published figures month by month from now on. Those figures will provide a regular demonstration of the Chancellor's failure to revive and support the real economy—the economy of investment, output and exports.

The figures will provide continual proof of the Chancellor's willingness to sacrifice the real economy in the hope of short-term party advantage. The balance of payments crisis will be the direct result of three related causes. The first of these is the consumer and credit boom which the Government have encouraged in the hope of political gain. Secondly, manufacturing industry has been so damaged during the last seven years that its share of world trade has fallen by 16 per cent. since 1979. Thirdly, and perhaps most desperate of all, is the waste of oil revenues, oil earnings, which should have been used to revive manufacturing industry but which have been squandered on the cost of escalating unemployment and which are now beginning to run out.

Already the deterioration in our manufacturing industries is imperilling our economic prospects. In 1978 there was a surplus of £5 billion in our trade in manufactured goods. In 1985 that turned into a deficit of £3 billion. On the Chancellor's own forecast—for what that is worth the deficit will grow to £7·5 billion by 1987. By then the Chancellor will be working in the City, where I have no doubt at all that he will feel completely at home. His willingness to ignore the needs of the real economy and to allow — indeed, to encourage — an escalating balance of payments deficit proves that his horizons stretched no further and that today they stretch no further than the next general election.