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Economic Growth

Volume 448: debated on Thursday 13 July 2006

10. What recent discussions he has had with his G8 colleagues regarding prospects for global economic growth. (84771)

My right hon. Friend the Chancellor met his G8 colleagues in June. At that time, Finance Ministers judged that prospects for global growth remained strong, although downside risks from high and volatile energy prices, global imbalances and the lack of progress on the Doha trade round remain.

I thank the Economic Secretary for that reply, but—as I think he knows—the UK’s recent economic growth looks good only when set against some poor comparators. Will he explain specifically why he thinks that the UK’s GDP growth over the past year has been less than the US’s, less than Canada’s, less than Japan’s, and less than the G7 average, and why we are forecast to grow less strongly than the Organisation for Economic Co-operation and Development average this year? Has the Treasury given up on the idea of the UK being able to compete in the top division for GDP growth in industrialised countries?

The growth rate for the UK was revised up by the Office for National Statistics a week ago for 2001, 2002, 2003, 2004 and 2005. Since 1997 growth in output has been 26 per cent., compared with only 15 per cent. in the previous nine years. We have also had the lowest unemployment. In the hon. Gentleman’s constituency, for example, unemployment has fallen by two thirds and long-term unemployment by 90 per cent. At the same time as achieving growth and low unemployment, we have had stability and low inflation. That is because of our successful reform of the Bank of England, which would be put at risk by proposals to change the inflation target annually and remove the majority of internal members on the Monetary Policy Committee. We were told a few months ago that there had been detailed discussions on those matters, and the Governor was forced to issue—

Order. If those are Opposition proposals, it is not for the Minister to tell the House about them.

When discussions take place with G8 colleagues, will the Economic Secretary explain to other members of the G8 why unemployment in this country has risen faster than in any other advanced country in the past 12 months?

Unemployment in the euro area is 7.9 per cent., in Germany it is 8.3 per cent and in Britain it is 5.2 per cent. That is the lowest level for 30 years. In the past four years there have been recessions in Japan, Germany, France and the US, but not in Britain. We all remember what happened when the Conservatives were running the economy. We remember what it was like to have unemployment at 3 million and interest rates at 15 per cent., and we are not going to go back to those days. It is about time we had a grown-up debate on the economy, instead of this triviality.

My hon. Friend is right: the high oil prices were discussed at the G8 meeting a few weeks ago. We have the highest oil prices for 25 years, and the geopolitical situation has meant that we have had high oil prices and falling stock markets since the beginning of the decade. Despite those pressures, we have still managed to combine rising employment, low inflation and rising growth. The last time such issues arose in the global economy, we had recession rather than growth, high inflation rather than low inflation and high unemployment rather than low unemployment. We have no intention of going back to those days.