Skip to main content

Public Expenditure—Inflation Rate

Volume 981: debated on Monday 24 March 1980

The text on this page has been created from Hansard archive content, it may contain typographical errors.

asked the Chancellor of the Exchequer, further to his reply dated 4 February concerning the relationship between public expenditure and the rate of inflation, whether the assumed increase in private sector output as a result of the reduction in public expenditure more than compensates for the reduction in output/incomes as a result of the reduction in expenditure; and if so, what is the mechanism which allows interest rates to fall despite the higher level of activity.

Output can grow at a satisfactory rate in the long run only if inflation has first been greatly reduced, and interest rates lowered so as to encourage private sector activity. For the precise mechanisms, I refer the hon. Member to the reply my hon. Friend gave on 17 March 1980.—[Vol. 981, c. 29–30].