The Rt. Hon. Sir John Major KG CH

Prime Minister of Great Britain and Northern Ireland 1990-1997

Chief Secretary (1987-1989)

Mr Major’s Parliamentary Answer on Industrial Productivity – 14 January 1988

Below is the text of Mr Major’s Parliamentary Answer on Industrial Productivity, made on 14th January 1988 in the House of Commons.

Mr. Stevens To ask the Chancellor of the Exchequer what has been the growth of industrial productivity in the British economy over the last 12 months.

The Chief Secretary to the Treasury (Mr. John Major) In the three months to October 1987 manufacturing output per head is estimated to have been 7.25 per cent. higher than a year earlier.

Mr. Stevens Does my right hon. Friend agree that that substantial increase in productivity is a major factor in keeping British industry internationally competitive? Will he also confirm that manufacturing output is growing faster than at any time since the early 1970s?

Mr. Major I certainly confirm what my hon. Friend has said. I should add that manufacturing output has now recovered from its loss during the recessionary period of 1980-81. Output is now above pre-recession levels and is rising sharply. We expect that it will continue to do so.

Mr. Morgan Would the Minister care to comment on the statement made last week in Dundee by the governor of the Bank of England, who said that growth in the British economy was unsustainably rapid? Before the governor made that statement, were his views discussed with the Government or, as his train passed through Nottingham on the way to Dundee, did he have the idea of forming his own branch of the UDM – the union of disgruntled monetarists?

Mr. Major I certainly cannot say whether the latter point is true. However, the governor was echoing what my right hon. Friend said to the Select Committee on the Treasury and Civil Service some time before. Specifically, my right hon. Friend said that the rate of growth prior to October, which was substantially above trend, was not likely or expected to be sustained next year. However, output next year in the non-oil economy is expected to be 3 per cent. and that represents a substantial level of growth and is substantially higher than that achieved at any stage under the previous Labour Government.

Mr. Neil Hamilton Does my right hon. Friend agree that one reason for this rapid increase in output and growth is that, today, it is worth working because one can keep more of what one earns? Therefore, while it is welcome that the Labour party supports reducing the proportion of GNP that is taken in taxes by cutting spending, is it not unfortunate that it is only the New Zealand Labour party which supports that policy?

Mr. Major I understand that, from time to time, attempts have been made to introduce some of the ideas of the New Zealand Labour party to the Labour party of this country, but with minimal success. My hon. Friend is entirely right about the supply side effects of lower taxation, and my right hon. Friend the Chancellor is acutely aware of those effects.

Mr. John Smith If the Minister is claiming success for the Government’s industry policies, can he explain why a balance of trade surplus of £5 billion has been turned into a deficit of £8 billion? What is the Government’s strategy for correcting that difficulty?

Mr. Major The right hon. and learned Gentleman will know that in the period since 1981, and for the first time in many years, export volumes have grown at a similar rate to the world trade in manufactures. That feat was not achieved at any time during 1974-79. The right hon. and learned Gentleman – uncharacteristically in my judgment – is selling British manufacturing short. It is doing exceedingly well, and the size of our export volumes is the clearest possible illustration of that success. The size of the import volumes has a direct relationship with the fact that the British economy is growing substantially faster than that of our competitors. The right hon. and learned Gentleman should be well aware of that.