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Inflation

Volume 893: debated on Thursday 12 June 1975

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7.

asked the Chancellor of the Exchequer what is his estimate of the current rate of inflation; and what action he is taking designed to reduce it.

9.

asked the Chancellor of the Exchequer what is the current rate of inflation.

18.

asked the Chancellor of the Exchequer if he is satisfied with the current rate of inflation; and if he will make a statement.

35.

asked the Chancellor of the Exchequer what his estimate is of the current rate of inflation; and what action he is taking to reduce it.

The increase in the retail prices index in the 12 months to April was 21·7 per cent. I explained in my Budget Statement the damage which would be caused if inflation continued at this rate.

In view of this runaway inflation, is it not high time, as some of us have been pressing, that the Government acted with a sense of urgency? If the Government now bring forward counter-inflation measures that are tough and relevant, including an effective voluntary incomes policy, is the Chancellor aware that, whatever view may be taken by some of his hon. Friends below the Gangway, he will be supported by a large number of people, of all parties and none, inside and outside the House?

Let me say seriously, first, that I recognise that inflation is by far the most serious and urgent problem which the Government and the people of this country have to face. I hope that the Government will have the support of all men of good will, in all parties and none, in any measures that they find necessary to tackle it. In reply to the earlier part of the supplementary question, I refer the hon. Gentleman and the noisy gaggle on the third bench above the Gangway to the remarks contained in the Financial Times editorial this morning:

"The temptation to search for some more immediate and dramatic gesture … could now prove a dangerous one. … The Chancellor's belief that the rate of inflation is now nearing its peak has a good deal of evidence to support it."
I ask the House to recognise that the attack on inflation is not one for the Government alone. It requires the sup- port of both sides of industry and, inevitably, to obtain support for action on the scale and of the severity required takes some time. The Government are determined to reach conclusions on this matter in the coming weeks with a view to halving the rate of inflation within the next 12 months.

Does my right hon. Friend understand that there are still many hon. Members on the Government side of the House who believe that we were sent here with a mandate not to interfere with the free collective bargaining process? Among the reasons for the present high rate of inflation are the relaxation of price controls and the relaxation on business rents. If my right hon. Friend wants to conquer the problem, he has to look in the direction of import controls and matters of that kind—if the Common Market countries let him. Therein lies his answer, and that is the policy he should be pursuing.

I understand the points made by my hon. Friend—and that is why I do not agree with him. My hon. Friend must recognise that the TUC, well-nigh unanimously, last year committed itself to guidelines for collective bargaining which it now recognises have not been fully upheld. The TUC is searching for more stringent guidelines for the next wage round and for ways of ensuring that they are complied with. I hope that the TUC will have the support of my hon. Friend in the conclusions which it seeks to reach on this matter.

Will the Chancellor now answer the original Question, which is being asked by the whole country? When will this rabble of a coalition Labour Government start to govern—before or after national bankruptcy?

From the fierceness of some of the supplementary questions asked from the Opposition benches, I have the impression that the Opposition are fully aware that the Government are governing but do not like some of the things that the Government are doing.

If we are discussing inflation—I saw the hon. Member for Oswestry (Mr. Biffen) nod his head when I made that last remark and I hope he will nod his head again to my next remark—it is the view of a large section of the Conservative Party that the scale of inflation from which we are now suffering is due to the total failure of the previous Conservative administration to control the money supply.

Is my right hon. Friend aware that several of the largest firms in the country do not attribute inflation to wages and salaries but draw our attention to the high cost of oil? What is my right hon. Friend doing about that?

Last year the fivefold increase in the cost of oil was one of the major causes of inflation. The increased cost of our imports, not only oil but sugar, commodities and many food stuffs, was a major factor. The major cause of inflation this year is excessive wage settlements, and I think that that is the general view of both sides of industry. On the question of what I am doing to bring down the cost of oil, I assure my hon. Friend that the Government are co-operating with all other consuming Governments in negotiations with the oil producers in the hope of producing greater price stability. My hon. Friend will recognise that the level of oil prices cannot be determined by the Government.

Does the Chancellor agree that the present rate of inflation is dangerous and, if it continues, could be disastrous? Is he planning new measures to come into operation over the next few months? To avoid uncertainty, are the Government still absolutely opposed to any form of statutory wage constraint?

Yes, Sir, I made clear only the other day in Glasgow that the Government oppose legislative interference in the bargaining process, and I gather that the great majority of right hon. and hon. Members on the Opposition benches agree with us on that matter. We are engaged in continuous discussions with the leaders of the TUC to try to achieve a satisfactory arrangement for collective bargaining during the next wage round. The Government, like other public authorities, also have responsibilities as an employer, which they intend to carry out.

Does the Chancellor agree that if the present under-utilised manufacturing capacity were henceforth utilised, it would reduce labour costs and would be the biggest contributory factor to reducing the overall level of inflation? How does that square with the answer that my right hon. Friend has just given?

My hon. Friend will be aware that no one wishes more than I to be able to take the measures which I know to be available to achieve fuller use of capacity in this country but, so long as wage settlements run at their present rate and produce inflation at its present rate, those measures would greatly aggravate our problems both on the side of inflation and on the side of balance of payments. So long as we have to finance 5 per cent. of our spending by borrowing from foreigners, my hon. Friend cannot ignore the attitude which foreigners take on this problem. I hope that I shall have my hon. Friend's support in ensuring that we get the rate of inflation down to a level which will enable us to take our own decisions without regard to considerations of that kind.

Does the Chancellor recognise that if we face this matter with the seriousness it deserves, he can no longer go on blaming the present inflationary situation on the policies of the previous Conservative Government? As he has acknowledged, the major cause of the high rate of inflation now is the extent to which wage settlements have roared ahead—and, we would argue, have been encouraged to roar ahead—because of some provisions of the social contract? Will the Chancellor further accept that the nation is thoroughly alarmed and disturbed by the apparent failure of the Government to come to grips with this problem? Does he realise that the nation would be willing to support the action which is necessary to tackle inflation as our major and overriding problem? Will he echo the words used by the Paymaster-General yesterday when he said there was an overwhelming need for urgency in bringing a better balance both in our overseas payments and in our Government accounting? That is the urgent action which the country awaits.

Personally I do not disagree with very much of what the right hon. and learned Gentleman said, but he will be well aware that a very large number of his right hon. and hon. Friends—one of them sitting beside him at this moment—take the view that the present level of wage settlements would have been impossible without the increase in the money supply which was organised by the last Conservative Government. I remember the hon. Member for St. Ives (Mr. Nott) making this very point himself just before he accepted appointment in the present Shadow Cabinet. If the right hon. and learned Gentleman is to be taken seriously he must ensure that the leader of his party, whom we are sorry but not surprised to see absent again from the Opposition Front Bench, does not make speeches like the one she made last night, in which she recommitted the Conservative Party to introduce a tax credits system which would add over £2 billion to the public sector borrowing requirement in 1975 according to figures published by the last Conservative Chancellor.

The Chancellor is well aware that the first stage towards a tax credits scheme is nothing more than the child endowment proposition which the Chancellor is putting forward as his own policy. Since the right hon. Gentleman referred to me, is he aware that many of my right hon. and hon. Friends and myself believe that the greatest single obstacle to a counter-inflation policy at the present time is the Prime Miinster, who seems incapable of doing anything but trimming on every single issue?

I regret to say that I am not surprised that the hon. Gentleman chose to try to defend his rather mixed record in this matter by attacking my right hon. Friend the Prime Minister, but it remain a fact that the leader of his party committed herself to introduce a tax credits scheme as soon as the Conservative Party returned to power. Fortunately, we know that that event is likely to be very long delayed.