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Inflation

Volume 929: debated on Tuesday 5 April 1977

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asked the Chancellor of the Exchequer what proportions of the inflation rate in 1976 were the result, respectively, of (a) increases in wage costs, (b) increased profit levels, (c) increases in prices of imported food and raw materials, apart from the depreciation of the £sterling, (d) increases in prices of imported manufactures and semi-manufactures, apart from the depreciation of the £sterling, (e) increases in (c) and (d) as a result of the depreciation of the £ sterling and

cost prices, and in 1976 at 1976 factor cost prices.

The figures are as follows. Estimates for 1976 are based on provisional national income figures.(

f) other factors; and what are the equivalent figures forecast for 1977.

The RPI increased by 15 per cent. over the year to the fourth quarter of 1976. There is no precise method of attributing this increase to its component factors because of the difficulty of accurately establishing both appropriate weightings and the time taken for each factor to feed through into the price level. But the Treasury forecasting model would suggest that, in terms of proximate causes of inflation, very roughly one-third of the 15 per cent. might be attributed to wage cost increases; about a half to import price increases—of which depreciation accounts for rather more than half; and the remainder to rents, rates, taxes, subsidies, profit margins and the 1976 summer drought. Equivalent figures for 1977 are not available, since it is not Government practice to publish forecasts for the exchange rate.