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Inflation

Volume 958: debated on Monday 20 November 1978

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1.

asked the Secretary of State for Prices and Consumer Protection what has been the increase in the cost of living over the past 12 months as measured in the retail price index; and what estimated rate of increase over the next 12 months the Government are using for planning purposes.

8.

asked the Secretary of State for Prices and Consumer Protection what is the latest rate of inflation.

17.

asked the Secretary of State for Prices and Consumer Protection what is the latest calculated percentage rate of price inflation.

21.

asked the Secretary of State for Prices and Consumer Protection what is the year-on-year rate of inflation.

The retail price index has increased by 7·8 per cent. in the 12 months up to October; the annual rate of increase has therefore been in the range 7 to 8 per cent. for the past seven months. The Government's forecast of the rate of inflation over the coming year was published on 15th November in the Treasury's economic progress report.

I am surprised that the right hon. Gentleman does not answer my Question. Is he aware that the Treasury view was that the retail price index would rise by between 8 and 9 per cent. over the next year? If the Government are successful in keeping earnings down to 5 per cent., does the right hon. Gentleman agree with me that that will mean a reduction in the standard of living of the average British citizen in the next year? When will the Government be honest enough to admit to this in public?

The hon. Gentleman should have done me the courtesy of reading the entire survey. The survey assumes that the 5 per cent. figure, which is certainly the Government's target, will be exceeded to a small degree. Were we able to keep overall settlements to 5 per cent. there would be a further reduction in the inflation rate, and that is what the survey says.

Will my right hon. Friend bear in mind that in this House the Conservative Party strongly opposed the strengthening of the Price Commission and that action can now come only from him? Will he ensure that the Price Commission is toughened up in the foreseeable future so that we put the fourth leg on the stool and take positive action on prices? My right hon. Friend knows as well as I do that our constituents will get no change out of the Tory Party on this subject.

I have no immediate plans to change the powers or activities of the Price Commission. There a some areas in which its powers might be sharpened and made more effective. Were that to come about, it would have to happen as part of a wider initiative on wages and prices in general. At present I have no plans to change the role or powers of the commission.

What effect will the increase in mortgage interest rates have on the retail price index? Why will the Government not accept at least part of the responsibility for this occurrence, bearing in mind the size of the public sector borrowing requirement?

There is a Question on this subject later on the Order Paper. The hon. Gentleman must take responsibility for denying the right of his hon. Friend to ask it. The simple statistical answer to the hon. Gentleman's supplementary question is a figure of 0.4 per cent. over six or seven months. I do not know how the hon. Gentleman has the gall, if that is the correct parliamentary expression, to talk about the PSBR, when he compares the success of the Labour Government in holding down that requirement with the utter failure of the Conservative Government to do so.

Is my right hon. Friend aware of the astronomic price of EEC grain compared to world prices? Will he undertake to take some action with the EEC authorities to see that the British housewife is able to take advantage of the current low price of world grain, rather than allow the Euro-fanatical press to blame the low wages of British bakery workers for the high price of bread?

My hon. Friend should not think of one European price in isolation. There is no doubt that over the range of food prices the EEC's common agricultural policy is now making a small contribution to increases in prices. None of us welcomes that. There are other ways in which the EEC is helping us. These matters have to be balanced one against another.

Will the Secretary of State take account of the fact that small and medium-sized businesses—particularly the latter—are having to bear in mind in their planning much higher wage awards than 5 per cent.? Will he give some estimate of what he thinks this will do to the retail price index in due course?

We have made no secret of our belief that a series of pay increases in excess of those described in the White Paper published in July would increase the rate of inflation. Because of that conclusion we are fighting hard, as part of our overall inflation strategy, to keep planned wage increases at or about that figure. I hope that the hon. Gentleman and the companies to which he refers will, unlike the leadership of the Opposition, join in supporting the Government in that endeavour.