asked the Chancellor of the Exchequer if he is satisfied that measures introduced so far will achieve his stated objective of a 10 per cent. annual rate of inflation by the end of this year.
asked the Chancellor of the Exchequer if he is satisfied with the progress of his policies to combat inflation.
The success of the Government's counter-inflation policy depends above all on the effective working of the social contract. If we can achieve stricter adherence to the TUC guidelines over the coming months, we can get the rate of inflation down by the end of the year. I have never stated an objective of 10 per cent.
As the rate of inflation—according to the Chancellor's own figures—has trebled since September from 8·4 per cent. to 25·2 per cent., will he explain how the allocation of further vast sums for indiscriminate food subsidies will help him to achieve his objective?
Yes, Sir. The allocation of sums to food subsidies will bring down the retail price index significantly, not only acting directly on the main indicator of inflation but reducing the rate at which settlements need to be reached.
If my right hon. Friend is to combat inflation more quickly than some people expect, does he understand that he will have to stop the bleeding that has occurred as a result of our entry into the Common Market? Does he understand these figures: a £2,000 million trading deficit in the course of two years, a 20 per cent. devaluation of the pound and a 33 per cent. increase in prices coupled with 750,000 men on the dole—and the number is rising? Does he realise that all those things are the result of our entry into the Common Market and that he would do well to advocate in the Cabinet that we should get out and keep out?
I am afraid that I do not understand those things. I recognise that many unpleasant things have happened over the last three years, but I do not think they can all be attributed to our entry into the Common Market.
Will the Chancellor amplify his statement, which I think has been repeated by the Prime Minister, that 75 per cent. of wage settlements have been within the terms of the social contract? Does that 75 per cent. include the allowed exceptions and in what proportion are they? Does that statement mean that 75 per cent. of settlements have been within the rise in the cost of living at the time of the settlement? What does it mean?
The hon. Gentleman has perhaps had an opportunity by now to read the various documents in which the guidelines for wage bargaining, which are part of the social contract, are contained. Seventy-five per cent. of the working people covered by settlements, not 75 per cent. of the settlements, are within those guidelines. Twenty-five per cent. are outside those guidelines, and I have said that that proportion is far too high.
Does my right hon. Friend agree that if Opposition Members want to do something to combat inflation they would have been well advised last night not to seek to increase the public borrowing requirement as such an increase is damaging to our campaign against inflation? Will my right hon. Friend give urgent consideration to ensuring that there will be increases in taxation, met by those with the greatest capacity to pay, to cover the cost of the decision which was taken last night?
Unless Opposition Members, in the light of their action last night, have decided to withdraw them, there are some Questions on the Order Paper about the public sector borrowing requirement which I shall be pleased to deal with presently. In reply to the last part of my hon. Friend's supplementary question, I am considering some very interesting proposals for raising the money which Opposition Members have added to the public sector borrowing requirement, and I shall announce them at the appropriate time.
To revert to the Chancellor's original answer, is it not a fact that in a public speech in September he told the public that he expected inflation to be reduced to about 10 per cent. by the end of this year if the social contract was adhered to? What has happened since September to change his view?
First, I did not say that in a public speech. I will send the right hon. Gentleman a copy of my speech if he wishes. I made clear that if the undertakings given by both sides in the social contract were maintained, if world prices did not rise and if there was international co-operation in the continued growth of trade and output throughout the world, we could get the rate of inflation in Britain down near to 10 per cent. by the end of 1975. I made clear in my speech in the House on 18th December that some of those conditions had not been fulfilled. In particular, the increase in world prices envisaged in December was substantially higher than any of us expected in the middle of last year. Secondly, I regret to say that the world is now moving into a recession in which the level of trade and output will not be maintained to the extent I hoped it would be six months ago.
asked the Chancellor of the Exchequer what has been the rate of inflation over the past three months expressed on an annual basis.
I would refer the hon. Member to the answer my right hon. Friend the Paymaster-General gave on 21st January to the hon. Member for Derbyshire. South-East (Mr. Rost).—[Vol. 884, c. 318–19.]
As the comparable figure in October was 8·4 per cent. and there has therefore been a dramatic increase in the rate of historic inflation, may I ask whether the Chancellor agrees that if the present rate of inflation continues there will be a remorseless and inevitable increase in unemployment? Does he also agree that there is an inescapable obligation on him to contain the rate of inflation, particularly wage inflation, to protect jobs?
The hon. Gentleman may be surprised that my answer is "Yes, Sir" to all that he has just asked. There is no question that the rate of inflation is too high and needs to come down. One important component in bringing it down, as I said earlier, is to have a less flexible interpretation of the guidelines and a stricter application of them in making settlements. However, I must remind the hon. Gentleman that this imposes responsibilities not only on trade unions but on employers. Some of the grossest breaches in the guidelines recently have been by bodies like the BBC and the clearing banks, which are always the first to criticise the Government for failing to ensure that the social contract is maintained.
Will my right hon. Friend clear up this ambiguity about his interpretation of the contract? He goes on about the guidelines and says that wage settlements must do no more than equate with the rise in the price index, but will he clearly state whether he is talking of gross or take-home pay?
Yes, Sir. First, I believe, as does the TUC General Council, that the social wage must be taken into account as well as negotiated wages. Therefore, it is settlements in relation to the past movement of the RPI. I strongly endorse the clarification by the General Secretary of the TUC last week that unions should relate the settlements and the claims they make to the past movement of the RPI, not to what they imagine may happen in future.
Reverting to the original Question, may I ask the Chancellor to confirm that the annual rate of inflation over the last three months, on the same basis as he told the country it was 8·4 per cent. in September, is now 23 per cent. and to explain why that change has occurred?
The main reason for this change is that in the last three months the index has reflected 11 threshold payments which had to be made under legislation introduced by the Conservative Government. Groups of workers who had been held back unfairly under statutory control—for example, nurses and postmen—had to be allowed to catch up. I am not aware that the right hon. Gentleman disagreed with that course. But now that thresholds are out of the way and the catching-up process has taken place, it is very important that we achieve a lower rate of settlement and a much smaller rate of exceptions to the guidelines than in the last few months.
Does the right hon. Gentleman accept that in his first five months as Chancellor he reduced the three-monthly annual rate of inflation to 8½ per cent.? How much of that was his own work? Does he accept that in the following four months he increased it to 23 per cent.? How much of that was his own work? Looking to the future, does he accept the estimate of the research department of my union, ASTMS, that the rate of inflation over the next 12 months will be in excess of 23 per cent.?
Like all hon. Members, I respect the hon. Gentleman's industrial and union experience, but I do not agree with the estimate he has quoted. He asked how much of what happened last year and this year was the effect of Government policy. There is no question that there will be some increase in the RPI this year resulting from Government decisions which, I think, are supported by Opposition Members: first, the decision to relax price controls to prevent mass bankruptcies and unemployment and, secondly, the decision to increase petrol prices and to have realistic pricing for the nationalised industries to reduce the consumption of energy. I hope that the hon. Gentleman, who on most occasions is a fairly objective fellow, will endorse both those elements in our current policy.
On a point of order, Mr. Speaker. In view of the unsatisfactory nature of the Chancellor's reply, I wish to give notice that I shall raise the matter on the Adjournment at the earliest opportunity.