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Industrial Growth Forecasts

Volume 990: debated on Monday 4 August 1980

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asked the Secretary of State for Industry what representations he has had from the Confederation of British Industry on the growth prospects of British industry in the next two years.

I met officials of the CBI on 24 July to discuss the economic prospect. The CBI reiterated its support for the Government's economic policies, but also made plain to me its concern over the effect of high interest rates and a high exchange rate on the prospects for industry and therefore its desire that the Government, and particularly the local authorities, should press on with reducing their spending and borrowing.

Is my right hon. Friend aware that since then more and more messages have been coming in from British industry of closures, lay-offs and short-time working? Is it not therefore necessary to tell the Treasury that if it maintains the high bank rate for too long—I accept that it has been necessary to keep the high rate for a time to reduce inflation—there is a danger of overkill? If too many businesses go down, arising from a bombed-out situation, the Government will find themselves—

Order. The hon. Gentleman is arguing a case. He has asked two supplementary questions.

Order. Does the hon. Gentleman mind if his first two supplementary questions are answered?

Does my right hon. Friend agree that the Government will have to make greater efforts and spend more money to help not only large, but small, businesses?

The message that my hon. Friend wants to reinforce is surely one not only for the Treasury but for all Government Departments, all local authorities and the whole of the public sector. The bulk of industry's problems are made much worse by the public sector's overspending.

Will the Secretary of State tell the House how many private representations he has received from big business men? Do they really support the policy of deliberately worsening the slump to discipline the unions, to reduce inflation and to weed out the inefficient? That seems incredible to me.

The hon. Gentleman has his assumptions wrong. In general, private business is behind the Government's policy, though it is desperately anxious that the Government should secure the lowering of inflation and interest rates, which can come only from reduced public sector, including Government, spending.

Does my right hon. Friend agree that interest rates would not now be so high if the public sector were not so dependent upon the amount of borrowing that it has to do? Secondly, does he accept that the private sector of industry would be a great deal better off if it had not paid so much in wages over the past two years?

I noticed that the Secretary of State did not once refer to growth prospects in reply to his hon. Friend the Member for Rutland and Stamford (Mr. Lewis). I understand why he did not do so. Has the right hon. Gentleman seen the Financial Times survey, reported today, in which the bulk of British industrialists claim that it is not high wages that are causing their present difficulties, but lack of demand? As this lack of demand is the direct result of Government deflationary activity, is it not about time that we had another U-turn?

because while imports are still pouring in there is a huge potential demand which British business is not able to meet because its products and prices do not satisfy our constituents in our high streets.