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Volume 886: debated on Monday 10 February 1975

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asked the Secretary of State for Prices and Consumer Protection what is the annual rate of inflation based on the Price Commission's index for the last three months.


asked the Secretary of State for Prices and Consumer Protection what have been the main factors responsible for the increase in the Price Corn-mission's index since October.

The Price Commission's index for the latest available period, which is 1st September to 30th November 1974, showed an annual rate of 191 per cent. The upward swing reflects, as the Price Commission said in its report, increases throughout the energy sector, especially for oil, and rising costs of wages and salaries in all sectors. Revision of these prices is comparatively in frequent and the combined effect of these increases may have exaggerated the upward movement.

May I remind the right hon. Lady of the remark of her right hon. Friend the Chancellor of the Exchequer during the election that the rate of inflation as a result of his splendid achievements had been brought down to 8·4 per cent.? Was the Chancellor fabricating that statement, or is the right hon. Lady now saying that, in spite of the achievements by the Chancellor of the Exchequer and his colleagues, since then the situation has got totally out of control under the guidance of the Government?

The hon. Gentleman would be unwise to follow that path too far. In the winter of 1973–74 the rate of increase in inflation according to the Price Commission's index was not the 19½ per cent. of today but 23 per cent. It fell to 16 per cent. in the spring and to 9½ per cent. in the summer, which is the period to which my right hon. Friend was referring. There is no doubt that the fall had taken place by the summer and that my right hon. Friend was basing what he said directly on the statistics available to the Price Commission.

Does the right hon. Lady agree with the Price Commission that any hope of avoiding massive price increases has been swept away by the rising tide of higher wages? Does not this underline the ultimate futility of maintaining price control while abolishing the Pay Board? Does not the right hon. Lady agree that unless she can persuade her colleagues to control the massive explosion in wages she and her Department might just as well pack up and go home?

The Price Commission did not say what the hon. Gentleman has attributed to it. First, the commission said that inflation was increasingly coming within our control and it asked us to draw lessons from that. Secondly, the Secretary of the Trades Union Congress, Mr. Murray, has specifically urged upon his fellow trade unionists and those who are not trade unionists the need to follow very closely the guidance given under the social contract. Thirdly, as the hon. Gentleman will be aware, about three-quarters of trade unionists are settling within the social contract and not all the pressure for breaking it comes from trade unions.

Would it not be easier for the Government to continue their persuasive efforts to contain inflation if over the Christmas period they had not sanctioned increases in top salaries.

That is a matter primarily for my right hon. Friend the Secretary of State for Employment.

The right hon. Lady scouted around the Chancellor's statement at the General Election about the 8·4 per cent., but the Chancellor also said that he thought we could contain inflation and get it down to a level of 10 per cent. per anum by the end of this year. The right hon. Lady will not give an estimate. How can those who are trying to stick to the social contract pitch their wage claims to take account of forthcoming inflation, as they are allowed to do, unless she makes an estimate of what it will be?

The hon. Gentleman has got himself into a tangle. First, I repeated exactly the figures that were available to the Price Commission and the Government, which are close to those quoted by my right hon. Friend after the summer when he made his statement. Secondly, the TUC's guidelines ask those who settle to have regard to the previous rate of increase and not to a prospective rate of increase. That was once again underlined by Mr. Murray in his advice to the trade unions only a few days ago. If that were done, we should be in a fairly strong position to achieve a decline in the rate of inflation.

Does my right hon. Friend agree that many of us are getting fed up with Opposition Members who, while apparently concerned about inflation, are taking every opportunity to knock the social contract, particularly when in the week before last, those hon. Members went through the Lobby to take a decision which will force up the public borrowing requirement and thereby stimulate the inflation about which they are allegedly concerned?

I support what my hon. Friend says. It is not notable that the Opposition condemn the pressure for settlement far outside the social con tract from the professions and others whom they obviously do not regard as being bound by the battle against inflation.

Is the right hon. Lady aware that she seems to be in conflict not only with the Chancellor of the Exchequer but with the Prime Minister? What did she mean by saying that some wage claims were being made by people who were outside the social contract? The Prime Minister said that all useful people were within the social contract.

With respect. I said that this did not apply only to those trade unionists who regarded themselves as bound by the social contract. It applies to professionals and others outside the original TUC settlement.

Will my right hon. Friend consider the formulation of a specialised price index based on the cost of living of the lower income group?

My hon. Friend will be aware that there is already an index which deals with pensioners' expenditure, and we are exploring whether there should be further indices of this kind.

Will the right hon. Lady acknowledge that the rate of inflation during the period she has covered is over twice the figure in the previous year? Will she indicate what rate of inflation she expects next year? The Government have just published their public expenditure figures for the February subsidy and they show that the Government must have thought hard about the inflation rate. What does the Secretary of State expect it to be?

I find the hon. Gentleman's remark most extraordinary, because last January the food index was running at 19·5 per cent., in February it was 20 per cent., and according to the Price Commission's own commentary it was running at 23 per cent. last winter. Therefore, I do not follow the hon. Gentleman's point.