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Price Commission

Volume 980: debated on Monday 3 March 1980

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asked the Secretary of State for Trade when he expects next to meet the chairman of the Price Commission.

In view of the various economic reports published today predicting further increases in the rate of inflation to well over 20 per cent., and in view of the growing number of people within the Tory Party itself, and even within the Cabinet who are beginning to realise that extreme doctrinaire monetarism is not the cure for inflation, will the Government, even at this late date, abandon their plans to abolish the Price Commission, because people are calling for more price control, not less?

The hon. Member is obsessed with the Price Commission, which has only a few weeks of life left. I would gladly make him the chairman of the Price Commission if it were in my power to do so.

On the serious point, I am not sure what some of the forecasters are proposing. I read today that some were recommending measured reflation. I am not sure what that means in present circumstances. There are only two questions to be asked at present: first, can we finance the deficit without intolerably high interest rates; secondly, is private sector credit growing too fast in relation to output? Those are simple questions, and the answers to both will be given by the Chancellor of the Exchequer in his Budget Statement.

Does the Secretary of State consider that Government changes in competition policy have had or will have an effect on the level of prices?

I hope that the Competition Bill will have some marginal influence on prices, but I have never made any claim that it will transform our economic environment, unlike Labour Members, who claimed that the Price Commission would substantially change the course of inflation. The hon. Member is confusing the symptoms of inflation with its causes.

My right hon. Friend has posed two questions, may I put a third? How does he think that a 17 per cent. minimum lending rate has helped to contain inflation?

My right hon. and learned Friend must understand that when the Government inherited a prospective borrowing requirement of £11·5 billion—which we succeeded in bringing down to a prospective requirement of £8·5 billion—we inherited a substantial deficit which we had to finance in a non-inflationary way. Interest rates will have to be at whatever level is necessary to finance that deficit.

Will the Secretary of State answer a fourth question, and tell us what very high rates of VAT do to inflation?

High rates of VAT have nothing whatever to do with inflation. The rate of VAT, which was increased by the Chancellor in his first Budget, was offset by an equal reduction in income tax. Therefore, the rate of VAT has nothing whatever to do with inflation.