To ask the Chancellor of the Exchequer what discussions he has had with Finance Ministers abroad concerning expansion targets for the Organisation for Economic Co-operation and Development economies.
Is the Minister aware that before the on Venice conference last year the United States Treasury Secretary, James Baker called upon OECD Governments to try to set a recovery target? Since then stock markets have crashed and the statement by the Group of Seven countries did nothing, so Governments had to intervene. Is it not time that the United Kingdom Government started to intervene and to set up a programme to aid recovery in this country?
Since the fall in stock markets it has become apparent that most major economies were growing more rapidly than seemed to be the case at the time. We are now confident that there will not be a recession in 1988. On the United Kingdom economy, we predict 3 per cent. growth in the non-oil economy, which is very healthy indeed. The major countries of the world have co-operated in ensuring that the difficult period following the financial market crisis has been coped with.
Does the Minister agree that the OECD estimates state clearly and categorically that the growth rate will fall from 2·75 per cent. to 1·75 per cent. in 1989? Is the Chancellor really saying that after he has sold off all the country's assets there will not be a recession or a slump, when there is an estimated balance of payments deficit of £5·2 billion?
I do not think that anyone can be categorical about growth rates in 1989. However, we can be reasonably assured that there will be some growth in 1988, albeit perhaps more modest than in the past. As I said, the British economy looks set to do particularly well, in spite of the gloom that the hon. Gentleman hopes to convey to the House.
Surely the fact is that towards the end of last year the Chancellor said that there was no point in having a Group of Seven meeting unless there was agreement. There was no meeting, and there was no agreement on anything significant. The statement at the end of December did not stabilise the markets until Governments intervened. The whole of OECD is now slowing down, and the effects of cuts in the United States budget deficit will aggravate that. How on earth can the Government be confident that the United Kingdom economy will continue to grow when the rest of the world is slowing down? Why do they not hold a meeting of the G7 countries to meet those targets for recovery asked for by United States Treasury Secretary Baker last year?
We never comment on intervention by the British Government. If the hon. Gentleman believes statements that other countries were intervening, he can draw that inference from the G7 statement. We are reasonably confident that the British economy will do well in future because the policies that have brought us prosperity are precisely the policies needed in times of difficulty, if difficulty should arise.
Does my hon. Friend agree that, because of the twin deficits—the trade deficit and the federal deficit in America—America cannot continue to be the engine of the world's economy? Britain is playing its part; its high growth rate has resulted in a small balance of payments surplus. Does my hon. Friend think that the two surplus countries of Japan and Germany are doing enough to fill the gap left by America?
My hon. Friend is quite correct. It is important that the surplus countries as well as the deficit countries play their part in removing the imbalances that have plagued the world economy. The Japanese economy is growing strongly in terms of domestic demand and we hope to see a strengthening of growth in Germany as well. My hon. Friend is right. The British economy has been the strongest growing major economy in the western world.
Do not the Chancellor's autumn forecasts depend on major corrections in the United States economy and on an expansion in domestic demand in West Germany and Japan? As that has been the subject of the Foreign Secretary's discussions with the Japanese Government, how can the Minister regard it as a fruitless subject for discussion?
No country in the OECD sets quantitative targets for GDP growth. That was the basis of the question that I answered initially. The outlook in Japan is for quite strong domestic growth, which will contribute to the removal of imbalances between Japan and the United States, and that is something that I welcome. I also welcome the presence of the hon. Member for Berwick-onTweed (Mr. Beith) today. I was sorry that he was not in the Select Committee yesterday when we were discussing, among other matters, VAT. We would have been interested to hear his views on where he would apply it.
My hon. Friend has hit on one of the most important aspects of the future of the Western economy. We must resist all pressures to move towards protectionism. Free trade brings prosperity to all partners and we are foremost in promoting it.