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Employment Creation

Volume 35: debated on Thursday 27 January 1983

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2.

asked the Chancellor of the Exchequer whether he considers that his 1982 Budget has achieved the encouragement to employment which he anticipated.

The Government's consistent policy, maintained in my last Budget, is to reduce inflation and so create the conditions for sustainable recovery, and hence better employment opportunities. The prospect now is for further modest recovery. The outlook for employment can be further improved by continued reduction of costs and further moderation in pay settlements.

When does my right hon. and learned Friend expect unemployment to start falling—this year, next year or 1985?

Even in answer to my hon. Friend I do not intend to break the practice of successive Governments of not forecasting trends of unemployment. By laying the foundations, to which I have referred, for continued success against inflation we are likely to make the speediest progress.

Has the Chancellor read the recommendations of the Confederation of British Industry for his Budget? Will he now take the measures that are needed to contain the inflationary effects of the fall in the pound, so that industry can take advantage of the recovery in competitiveness without the costs being passed to the consumer?

I have, of course, studied the CBI's recommendations and agree with the implications of the hon. Gentleman's question. The fall in the pound will help to improve competitiveness only if it is combined with still lower pay settlements and still greater improvement in productivity.

Does my right hon. and learned Friend agree that the fall in the value of oil represents a very important stimulus to British manufacturing industry, particularly in the west midlands? Will he undertake that the Government will make no attempt whatever to hold up the price of oil?

My hon. Friend knows that this country is a price taker and not a price maker in the oil markets. It is right that although the modest fall in the price of oil represents both gains and losses for this country, the overall effect is likely to be beneficial. It would, however, be in no one's interest if the price of oil were to fall too far too fast.

The Chancellor must recall that when he presented his last Budget he described it as a Budget for industry, for jobs and for people. Is he aware that since he presented that Budget unemployment has increased by 270,000 and manufacturing output has fallen by 1½ per cent.? Does he not agree that his Budget judgment was wholly wrong? What does he intend to do to have some impact on the problem of unemployment and falling output?

I remind the right hon. Gentleman that the growth in output in the United Kingdom since the spring of 1981—[HON. MEMBERS: "1982".]—1982 is a little over 1 per cent. In Japan there was a rise of 3 per cent., while in all the other countries of the summit seven output fell substantially during that period.

Real demand rose in Britian by 4 per cent. last year. If we are to achieve the growth in output that that makes possible, it is all the more necessary for us to continue to improve our competitiveness.