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Inflation

Volume 983: debated on Thursday 24 April 1980

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7.

asked the Chancellor of the Exchequer when he now expects the inflation rate to fall substantially.

The Financial Statement and Budget Report forecast published at the time of the Budget envisaged that the 12-monthly increase in the retail price index would peak at slightly over 20 per cent. in the second quarter of this year before falling to 16½ per cent. in the fourth quarter. I cannot helpfully expand on those forecasts.

Now that the inflation rate has almost certainly exceeded 20 per cent., does not that show that the right hon. Gentleman's speech in January in which he said that Britain was in for three years of unparalleled austerity is proving only too correct? In view of his latest speech on the movements in money supply and inflation, does he agree that, although it was an honest and courageous speech, it exposed the mumbo-jumbo of the Government's economic thinking?

If I wanted commendation for my speeches, I hope that the hon. Gentleman will not think me discourteous if I say that I should not look to him for it. If I had to comment on the nature of my speeches, I should say that they are trite and commonplace rather than courageous.

Is my right hon. Friend worried at the current level of the increase in the cost of public sector pay, which, with the help of Professor Clegg—about whom I shall not say any more—is touching 25 per cent.? Will he undertake that the Government will get a grip on the problem and ensure that this disastrous situation does not repeat itself in the coming year?

It is important to get the issue of Professor Clegg into perspective. Many of my hon. Friends were fairly happy to fight on an election manifesto that had no commitment to disavow the Clegg recommendations. The real test is the extent to which settlements for the current pay round are manageable within the current cash limits. On that analysis, I think that there is some ground for modest hope.

Is the Chief Secretary aware that the innovation of the Government that is repugnant to Labour Members is their abandonment of their direct responsibility for promoting sensible policies on wages and prices? Will the right hon. Gentleman, who has been the architect of that, disavow the Government's policy before it is too late?

If one can translate that into everyday current political experience, it is an invitation for the Government to endorse a quasi-statutory control of incomes which collapsed, with all the consequences that are now being dealt with by Professor Clegg. Although we may not learn all that much in politics, I think that we have learnt that much.

Will my right hon. Friend continue to remind the House and the country that when the Labour Party was in Government it achieved a reduction in the inflation rate only when the Labour Government were forced to introduce the so-called monetarist measures that they now criticise us for pursuing?

I think that the right hon. Member for Leeds, East (Mr. Healey) was an imperfect monetarist. When I look at the Labour Party, I take sustenance from Lord Butler by accepting that he is the best monetarist that we have.

May I thank the right hon. Gentleman for what I think he intended to be a compliment? I remind his hon. Friend the Member for Hornchurch (Mr. Squire) that the rate of inflation was halved in the year before the Labour Government went to the IMF. Let him put that in his pipe and smoke it. Given the right hon. Gentleman's distaste, contempt or distrust of Treasury forecasts, why has he skulked behind the Red Book forecast for inflation at the end of the year? As an honest and imperfect monetarist, does he believe that the rate of inflation in the fourth quarter of this year will be as low as 16½ per cent.? Let him come out from behind the shelter of the Red Book and tell us what he really thinks.

I am complimented that the right hon. Gentleman should regard my remarks as a compliment. I know that he travels in stony territory and that it is hard to get compliments these days. I quote 16½ per cent. from the Red Book because it is published with the authority of the Government and because it is intended to contribute to public discussion and understanding. The House and politicians will get themselves into trouble only when they crucify themselves on these figures.