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The Longer Term Prospect

Volume 205: debated on Tuesday 10 March 1992

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A whole generation has grown up to accept inflation as an unalterable fact of life. But we are now making steady progress towards price stability—an environment in which the decisions of businesses and consumers are no longer distorted by the expectation of a general upward movement in prices. Inflation has been the scourge of our economy for decades, and its defeat, not just here but elsewhere in Europe, will represent a tremendous achievement, bringing enormous benefits to British businesses and families. There are those who would put this at risk by seeking to pump up demand, but I am not prepared to take steps which would call into question the Government's determination to match or better the inflation performance of our Community partners.

And even if it were thought desirable, it is not remotely feasible for Governments to try to target the level of demand month by month or quarter by quarter. Having made such progress in getting inflation down, it would be tragic now to throw it all away with an ill-judged or ill-timed attempt to kick-start demand.

The challenge before us is not to provide some artificial short-term stimulus to the economy. It is to continue the supply-side reforms of the 1980s. Low tax and light government have produced an economic environment which spurs competition and rewards enterprise. Our job now is to build on them to help people and businesses make the most of recovery. And that will be the theme of my Budget today.

Between 1979 and the end of 1990, the number of businesses rose by almost a third. Even during the recession capital spending on plant and machinery has remained higher as a proportion of GDP than at any point in the 1970s. As a result we have seen exceptional growth in manufacturing productivity—faster than in any other G7 country in the 1980s. Industrial relations have been transformed. Fewer days were lost to industrial action in 1991 than in any year since records began a century ago.

The confidence of foreign investors in Britain's renewed economic strength is demonstrated by our continued high share of inward investment. Almost half of the direct investment in the European Community from the United States and Japan comes to the United Kingdom. Those investors recognise that Britain, with its low taxes, good industrial relations and stable currency, is the right place to come to exploit the opportunities of the single European market.