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Inflation (Price Control)

Volume 958: debated on Monday 20 November 1978

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15.

asked the Secretary of State for Prices and Consumer Protection what is his estimate of the contribution of price control to the containment of inflation, as compared with that of income restraint.

26.

asked the Secretary of State for Prices and Consumer Protection what effect on the retail price index the Price Commission's interventions have had over the past year.

The main causes of the substantial improvement in the rate of inflation have been the moderate level of pay settlements and the Government's monetary and economic policies. The exercise of the Price Commission's powers results in a modification and postponement of many price rises and ensures that unjustifiable price increases are prevented.

Does my right hon. Friend agree that in a mixed economy it is difficult to operate income restraint equitably? Will he therefore ignore the blandishments of the Opposition and place greater emphasis upon price restraint? Will he advise his right hon. Friend the Prime Minister—or, if he cannot do that, advise me and I will advise him—that if his three-legged stool is not to collapse it must be propped up by a further leg of price restraint?

I understand the great attraction in calling for more price restraint, but those who ask for it rarely define the form in which it should come about. I am wholeheartedly opposed to an overall price freeze because I think that it would do a great deal of damage to industry and to employment. The most effective form of prices policy is the selective one operated by the Price Commission. With the exception of the safeguard clauses, which cause some problems, we have a good prices policy which is being operated wisely and in a determined way.

Does not the Secretary of State yet realise that the most effective control of prices lies in competition and that this affects prices more than any of the £7 million a year that the commission has been spending? As the right hon. Gentleman apparently begins to see, the actions of the Price Commission in putting up costs and putting down the profitability of private industry affect investment and, therefore, jobs. That is what results not just from a price freeze but from the actions of the Price Commission.

I do not, of course, agree with the second part of the hon. Gentleman's supplementary question and there is no evidence to support what he has said. On his first point, the hon. Gentleman may have noticed that six months ago I issued a Green Paper outlining ways in which competition in British industry could be extended and made more effective. I hope that we shall have support for that Green Paper from the Conservative Party. We have not had any support yet. All we have had is criticism, particularly from the CBI.

Does my right hon. Friend agree that the two-thirds or more of the people of this country who emphatically support the Government's counter-inflation policy believe that price restraint is easier to achieve if incomes are not dominated only by the casual brutalities of the market?

In view of the Secretary of State's earlier answer, when he attacked the previous Tory Administration, will he concede that he is now saying that the sole cause of inflation is an increase in the money supply and also concede that as a result of the 16 per cent. increase in M3 up to last April it is certain that inflation will be well into double figures by the end of next year?

The convoy cannot always travel at the speed of the slowest ship. I listed in a previous answer all the causes of inflation—not just that one—and I do not propose to list them again. I have already referred the House to the Treasury forecast for inflation next year and to the failure of amateur forecasters on the Conservative Benches. I have no reason to believe that we shall not have a successful year of counter-inflation policy in 1979.

Will my right hon. Friend consider issuing a White Paper setting out the efficacious methods that the Government could exercise to restrain prices in a free market economy, because that might go a long way towards getting acceptance of an incomes policy?

I suspect that my hon. Friend is tempted by what I regard as the chimera of an overall prices freeze, which I do not believe would be in the interests of the economy or our policy for reducing the level of unemployment. The effective way for us to control prices—if control is the right word—in the sort of economy that we manage is, first, to run the right sort of economic policies, which we have been doing, and, secondly, to have a policy of selective restraint, which is organised by the Price Commission. That is what we must continue to do.

Will the Secretary of State now answer the Question asked by my hon. Friend the Member for Cardiff, North (Mr. Grist) and tell the House clearly and with absolute candour what effect in precise numerical terms the Price Commission's interventions have had on the retail price index in the past 12 months?

It may be that the calculation of the hon. Member for Gloucester (Mrs. Oppenheim) was, for once, correct. That may be the figure. I have never made that calculaton.

Because it implies a role for the Price Commission that I have never assigned to it. The commission is not an agency for keeping the RPI down. It is an agency for preventing individual, unjustifiable price increases, and that is what it has done.