Growth Rates

Oral Answers to Questions — National Finance – in the House of Commons at 12:00 am on 11th June 1992.

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Photo of Ms Joyce Quin Ms Joyce Quin , Gateshead East 12:00 am, 11th June 1992

To ask the Chancellor of the Exchequer how many G7 countries will have had a lower average annual rate of growth than the United Kingdom between 1979 and 1992, using the latest International Monetary Fund forecast for 1992.

Photo of Mr Michael Portillo Mr Michael Portillo , Enfield, Southgate

None. But between 1981 and 1991, of the G7 countries, only Japan had a substantially higher average annual rate of growth than the United Kingdom.

Photo of Ms Joyce Quin Ms Joyce Quin , Gateshead East

The Minister confirms that the answer is none. Given the low rate of growth that we have experienced since 1979, despite North sea oil, the current weak levels of investment and our record balance of payments problem, how do the Government expect us to obtain increased, long-term and sustainable growth in future years?

Photo of Mr Michael Portillo Mr Michael Portillo , Enfield, Southgate

The hon. Lady misinterprets my answer. She chose her years carefully to obtain the answer, but she knows that during the 1980s the United Kingdom had a good rate of growth. Between 1981 and 1989, we had eight years of growth averaging more than 3 per cent. a year, and between 1980 and 1990 our rate of growth was faster than that of Germany, France and Italy. By comparison, in the 1960s and the 1970s, we were at the bottom of the league. There is no reason why we should not get back to those high levels of growth.

Photo of John Horam John Horam , Orpington

My right hon. Friend is undoubtedly right about the growth rates in the mid-1980s. Does he agree, however, that if we are to return to those growth rates he must, first, cut interest rates further and, secondly, severely restrain the growth in public expenditure—and I mean severely? What are my right hon. Friend's policies in that regard?

Photo of Mr Michael Portillo Mr Michael Portillo , Enfield, Southgate

I am sure that what my right hon. Friend the Chancellor has been able to do in bringing down interest rates from 15 to 10 per cent. is an important precondition for recovery. My hon. Friend is right to say that it is important that we should fulfil our pledge to reduce our public spending as a proportion of gross domestic product and, in the medium-term, to eliminate our borrowing. Those are important economic objectives.

Photo of Mr William Ross Mr William Ross , East Londonderry

If, as the Minister says, a decrease in interest rates is a precondition for recovery, when does he expect to fulfil that precondition and substantially decrease interest rates?

Photo of Mr Michael Portillo Mr Michael Portillo , Enfield, Southgate

The hon. Gentleman is being less than fair about recent events. Since the autumn of 1990 interest rates have been reduced on nine separate occasions and they have fallen from 15 to 10 per cent. That is an important change and it is an important precondition for recovery.

Photo of Mr David Martin Mr David Martin , Portsmouth South

Will my right hon. Friend give me his judgment on the prospects for economic growth and confidence if the Opposition's policies had been put into effect after the general election?

Photo of Miss Betty Boothroyd Miss Betty Boothroyd Speaker of the House of Commons

Order. The Minister has no responsibility for that scenario.

Photo of Mr John Smith Mr John Smith , Monklands East

Does the Chief Secretary accept that, in view of today's disappointing Confederation of British Industry survey on sales, an apparent post-election recovery has petered out already? Surely, given the continuing malaise in the economy and the constantly rising levels of unemployment and bankruptcies, action must be taken by the Government to stimulate the economy with an early cut in interest rates, such as has been advocated by the chief economist of the Bank of England.

Photo of Mr Michael Portillo Mr Michael Portillo , Enfield, Southgate

The right hon. and learned Gentleman has possibly not yet had the time to study what the CBI distributive trades survey shows. It shows a strong improvement in business confidence, which bears out a number of recent surveys of business confidence. Confidence is now at the highest level since August 1988 and the distributive trade sector improved strongly in May to plus 32 per cent. It is useful so soon after the election to have confirmation from the Labour party that it would not wish to follow prudent fiscal policies and that it would be interested in moving to lower interest rates, whether that was prudent or not. I am sure that the public, especially the investing public, will note that.