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Volume 931: debated on Saturday 5 March 1977

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asked the Prime Minister when he next plans to meet the President of the CBI

I met some of the leaders of the CBI, including the President, on 15th February. Further meetings will be arranged as necessary.

When these further meetings are arranged, will the Prime Minister be discussing phase 3? Following thedecision of the engineering workers' union yesterday, is phase 3 now dead? If so, should not the Prime Minister phase himself out and put the matter democratically to the test at a General Election?

I note the glee with which the Opposition meet every possible obstacle that is placed in the way of securing an incomes policy. I trust that the country will note, it too. I read this morning that the AEUW's rejection of a phase 3 yesterday was met by the rejection of a decision to go for a big and high wage claim.

If the Opposition really wish to help, I think that they can best do so by not attempting to drive wedges in a situation in which the whole economic future of the country is at stake. It would also help if we knew whether, if ever there should be a Conservative Government, at a moment like this they would be trying to secure an incomes policy, or whether it would be a free-for-all, with the sky as the limit.

Does my right hon. Friend agree that if the Conservative Party had its way the economy would be in utter chaos? Will he, none the less, accept that phase 3 and the social contract are now severely in question, and that many members of the trade union movement and leaders of the trade union movement are finding themselves under tremendous pressure? The only way to meet this pressure is to move from the present policy towards partial reflation of the economy and to take into account the fact that bigger wage increases must be given, otherwise the project will burst wide open.

I agree with the first part of my hon. Friend's question—that the Opposition have no policy for dealing with the economic situation that confronts this country. It is that which gives me additional strength to pursue the difficult policy that we are following.

On the second part of my hon. Friend's question, I think, with respect, that he is repeating some of the things that I have said about the next phase of incomes policy. We all know the pressures that have built up on differentials and other matters, and I have indicated, as has the Chancellor of the Exchequer, that over the next two to three months we must try to work for a policy that will restrain these pressures, whilst recognising the real problems that ordinary people have in their daily lives.

The Government will be ready to reflate the moment our economic situation seems to put us in a position to do so. Things are going the right way. Our reserves are the highest ever. They were at a record level yesterday. Interest rates are steadily coming down. [Interruption.]The shouts from the Opposition cannot drown the fact that building society rates will also be coming down again soon. These matters are moving in the right direction, even though the Opposition do not care to admit it.

When the Prime Minister next sees the CBI, will he be kind enough to tell its members whether he thinks that it is the employers or the trade unionists in Britain who are not sufficiently responsible to be trusted with a return to free collective bargaining?

I should not dream of talking to either group about this in terms of responsibility or lack of responsibility, because that is not the best way to get an agreement. What is clear is that, because of the pressure of circumstances, employers are frequently tempted to offer high rates, and that is then followed by other employers in order to get labour. This is a difficult situation. We have all been trying to handle it. The Opposition have failed time after time. We have also failed in the past. Now the future of our country is involved, and we are going to make another effort at solving the problem.

If the Prime Minister is so pleased with his economic performance, will he explain to the House why the only European country to have a worse record on inflation than ours over the period of the Labour Government is Iceland?

With respect, the right hon Lady is selective in her choice of statistics. [Interruption.] The right hon. Member for Knutsford (Mr. Davies) should keep quiet after the untruth that he told about me yesterday. It would not come amiss if he were to apologise, and I hope that he will do so. [Interruption.] I hope that he will raise a point of order on this.

My reply to the right hon. Lady's question is that the truth is that if one takes the three years separately one sees that the rate of inflation has improved in the third year by comparison with the first and second years. The reason for the situation in the whole period which the right hon. Lady took is the increase in money supply, which worked its way through in the first 18 months of Labour Government. [Interruption.] It is no use the Opposition trying to dodge their responsibility for this. If the right hon. Lady were not so selective she would not take the period from March 1974, because she knows what happened then. She knows what happened to the money supply then. The truth—and I think that I know the figures from which the right hon. Lady is quoting—is in Hansard, in replies that I have given. [Interruption.] I know that the hon. Member for Chingford (Mr. Tebbit) is the right hon. Lady's lap-dog and that he puts down Questions from which she draws the answers. I know that. I am bound to say to the right hon. Lady that, as she knows, if she looks at the third column of those figures she will see that the rate of inflation is improving and that she has selected the wrong instance.

Why, then, were the Prime Minister and his colleagues claiming in the last election that they had inflation licked and that it was 8·4 per cent.? On that basis, it is now 19·9 per cent.

The figure of 8·4 per cent. was quoted over a period of three months. What I should like to hear from some responsible member of the Opposition—if, indeed, there are any —is whether the Opposition deny the forecasts that are now being made that inflation will continue to come down in the second half of this year and the first quarter of 1978.