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Inflation

Volume 932: debated on Thursday 26 May 1977

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3.

asked the Chancellor of the Exchequer what is his latest estimate of the current rate of inflation.

11.

asked the Chancellor of the Exchequer what is the latest official figure for inflation based on a year-on-year calculation.

16.

asked the Chancellor of the Exchequer what is the latest annual rate of inflation in the United Kingdom and West Germany, respectively.

Over the 12 months to April the retail price index rose by 17·5 per cent. The most recent available figure for West Germany is for the 12 months to March, when the increase was 3·9 per cent.

Is the right hon. Gentleman aware of the large number of elderly people whose lifetime plans for retirement are still being ruined by inflation? Are the Government using inflation as a weapon to redistribute capital or income, or is it just that Socialism does not work?

I hope that the hon. Gentleman realises that there are important problems for elderly people and many others too. If those people consider the proposals that the hon. Gentleman's party has in mind they will note that virtually every component in the 17½ per cent. price increase would be much worse under anything that the Conservative Party is proposing.

What explanation does the right hon. Gentleman have for our rate of inflation still being four times worse than that of our West German competitors? Is the answer that whereas the West Germans have a social-market economy, we have the social contract?

No. The explanation is nothing like so facile as the hon. Gentleman suggests. As I have said frequently, the reason for our bad performance is not something that started three years ago. We have had a bad performance for many years, and that is the basic reason for our position, both in terms of inflation and in many other respects, being worse than that of other countries. However, we are beginning to get the matter right. I have no doubt that we shall soon have our rate of inflation down.

Does my right hon. Friend agree that there is a degree of insincerity in the submissions of Opposition Members—indeed, a massive degree? If they had their way and there was no control of prices, which is what they are always harping on, does my right hon. Friend accept that there would be a massive increase in inflation, which would hit old-age pensioners and the lower income groups more than anyone else? Does he agree that their attitude should be utterly condemned?

Will the Chief Secretary tell the House whether he and his right hon. Friend still believe that we shall get down to single-figure inflation on schedule, as was suggested in the Budget? Secondly, what steps is he taking to increase productivity within the nation, which will be the single biggest way to work ourselves out of this problem?

The answer to the first part of the question is "Yes, Sir." I entirely agree that the answer to our difficulties is to improve and increase our productivity. Indeed, we are working closely with both sides of industry to that end. The hon. Gentleman knows that it is for industry, not for the Government, to increase productivity—but the productivity of this Government, man for man and woman for woman, is also better than that of most of their predecessors.

Does my right hon. Friend agree that although some countries in Western Europe have more favourable rates of inflation than we have they have not had the disadvantage of the Conservative Government led by the right hon. Member for Sidcup (Mr. Heath), which increased the money supply by 24 per cent. in 1972 and by 26 per cent. in 1973?

My hon. Friend is absolutely right. We started with an appalling handicap by having to take over from our predecessors.

Has the right hon. Gentleman seen the authoritative reports in many newspapers that one of the Government's proposals for trying to slow down the rate of inflation is to freeze nationalised industry prices? Will he give us a firm assurance that there is no question of the Government's contemplating a proposal of that kind, considering the Chancellor's robust views on the matter?

The hon. Gentleman is trying hard to prove my hon. Friend the Member for Ealing, North (Mr. Molloy) absolutely right. It is remarkable coming from an hon. Member who supported legislation to do precisely what he is asking now. I see all kinds of reports in newspapers, some of which both he and I would not believe. I am not prepared to speculate on what may be in particular newspapers.

23.

asked the Chancellor of the Exchequer what is his latest estimate of the current rate of inflation.

I refer the hon. Member to the reply that I gave earlier today to the hon. Member for Gosport (Mr. Viggers) and Romford (Mr. Neubert) and my hon. Friend the Member for Bolsover (Mr. Skinner).

How can the Government be so sure that the 14 per cent. increase in pensions will be adequate to cover the increase in prices November to November when the three-monthly rate of inflation is 20·5 per cent. and the annual rate is 17·5 per cent?

The hon. Gentleman will know that what the Government have legally to do is increase pensions in line with inflation from November to November. Most of the November-to-November forecasts are about 13 per cent. The increase in pensions is 14·4 per cent. There is a positive margin over and above the 13 per cent. forecast, which will give pensioners a real increase in their pensions.

As the Chief Secretary told us earlier that the causes of Britain's unfavourable inflation experience at present have been operating over the last 70 or 80 years, will he explain why different periods in the last 70 to 80 years have been characterised by acute deflation, acute inflation or no inflation at all?

The right hon. Gentleman asks an interesting question. I am happy to deal with it. As a matter of fact, during the course of that period reasons for inflation would have varied from time to time in line with the right hon. Gentleman's own views on monetary policy.

In view of the Conservative Opposition's obsession with statistical extrapolation, will my right hon. Friend comment on the fact that if the tendencies of the last 18 months continue Britain's inflation rate in a couple of years will be lower than that of most of our Western European competitors?

My hon. Friend and the House will know how interested I am in all kinds of forecasts. I am not prepared to forecast what our rate of inflation will be by comparison with everyone else's in the world in 18 months' time. What I can say is that at present it seems that our rate of inflation will be considerably lower then than our present annual rate of inflation.

While the Minister is thinking of a better answer to the right hon. Member for Down, South (Mr. Powell) may we return to the pay deal aspect of inflation and the conditional tax reliefs that were touched upon earlier? The Chancellor giggles nervously when he is pressed on this matter, but does the Chief Secretary accept that it is very important that small businesses should know what the standard rate of income tax for 1977 will be? That is vital for their business decisions. Will the right hon. Gentleman tell us what the Chancellor apparently will not tell us, namely, when we are going to have a firm decision about this, whether it will be in the Finance Bill, and what are the conditions now upon which the decision will be taken to reduce the rate of income tax?

The hon. Gentleman has got it wrong. Small businesses pay their income tax in respect of profits for this year in either 1978 or 1979. They will know long before then.