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Retail Price Index

Volume 891: debated on Monday 28 April 1975

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16.

asked the Secretary of State for Prices and Consumer Protection what is the current rate of price increases based on the last three months of the retail price index expressed at an annual rate.

17.

asked the Secretary of State for Prices and Consumer Protection what has been the increase in the retail price index during the past 12 months.

20.

asked the Secretary of State for Prices and Consumer Protection, what is the current rate of inflation, based upon a grossing-up to an annual rate of the last three months increase in the Retail Price Index.

The increases in the retail price index over the 12 months to March 1975 was 21·2 per cent. The change over the three months to March 1975, expressed at an annual rate, was 25·6 per cent.

Does the right hon. Lady agree that those figures indicate that the only effect of the elaborate mechanism of price control is temporarily to suppress the symptoms of inflation? Does she not now openly agree with what her colleague the Chancellor of the Exchequer said in many passages of his Budget Statement that the only long-term and effective way of controlling inflation is by controlling the supply of money?

No, I do not agree with that. What we can say clearly is that the annual rate of increase, where there are neither food subsidies nor a Price Code, would be about four or five points higher. It would not be responsible to allow that situation to arise. The hon. Gentleman would make a mistake if he were to put too much reliance on a three months' figure. As I said earlier to the hon. Lady the Member for Gloucester (Mrs. Oppenheim), in the three months to April 1974 which were indexed in that period part of which came during the administration of the hon. Lady's party and part during ours, the annual rate on a three-month basis was 26·7 per cent. while in the summer it fell to 8.4 per cent. It is a great mistake to base too many assumptions on those three months' figures.

Does my right hon. Friend agree that even on the figures put forward by Opposition Members the end of the Price Code would mean an acceleration of the inflation rate? Does she further agree that it ill behoves hon. Members opposite, who belong to a party which has no economic policy to speak of, to abuse the efforts of the present Government who are trying to combat inflation?

Yes, I accept that. It is true. We are taking steps to modify inflation so far as we can. It would be fair to add that the reasons for British inflation lie very deep in other spheres as well as in the increase in raw material prices, which have markedly slowed down. One cause is an increase in incomes. Ours is a low wage economy basically, and one reason for this is the failure over many years to invest adequately.

Why is our rate of inflation so much higher than that among our European partners—indeed four times that of Germany? Could it be that our European partners have competent Ministers prepared to exercise firm policies against inflation whereas the right hon. Lady's Cabinet colleagues have surrendered responsibility, decision-taking and sovereignty to the TUC?

That is a good political remark from the hon. Gentleman but it is a long way from the truth. One element of the truth was expressed in Sir Don Ryder's report about British Leyland, when he pointed out that car workers in British Leyland were using machinery far older than that behind any of their competitive workers in the countries of Europe. That also has a great deal to do with the current situation.

As we have now crossed the hyper-inflation threshold under the present Government, and as our rate of inflation is nothing short of a national disaster, if the right hon. Lady does not approve of the taking of three-month inflation rates, as she says, why did she and her right hon. Friend the Chancellor of the Exchequer at the time of the last election take a three-month inflation rate of 8·4 per cent—it now being nearly 300 per cent. higher? As a consequence, will the right hon. Lady rename her department the Department of Higher Prices and Consumer Deception?

The hon. Lady will recall, if she can remember that far back, that I based my remarks at the time of the election on the statement of the Price Commission, that statement being that in the summer the rate of inflation was running at approximately 12 per cent. I quoted that in my statement at Transport House, and it was absolutely accurate.

No responsible person on either side of the House, faced with the sort of inflation which we now have, should be unaware that this situation is to some extent within our control. I have already said that incomes, on the one side, and a failure to invest, on the other side, have a great deal to do with it, regardless of the Government's colour.

Will not falling bonus and overtime earnings and the rising level of unemployment mean that consumers' expenditure is likely to fall well behind the rate of increase in real earnings? Will my right hon. Friend therefore make sure that every pressure is maintained to keep down the cost of living so that there is not an undue deflationary effect?

What my hon. Friend says is well taken, but he will appreciate that it is important that the cost of living and the level of earnings should be kept broadly in line with one another in the situation which we as a country face, given our balance of payments difficulties. I assure my hon. Friend that it will be very much in our interests as a country to see the cost of living fall, and I have some reason to believe that that will happen towards the end of the year, assuming no increase in the rate of income supplements.