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Inflation Rate

Volume 461: debated on Thursday 14 June 2007

7. What the average retail prices index inflation rate was in the first quarter of (a) 1997 and (b) 2007; and if he will make a statement. (142567)

RPIX inflation averaged 3.7 per cent. in the first quarter of 2007, largely as a result of high energy prices and high food prices. It was down to 3.3 per cent. last month and independent forecasts expect inflation to be back at its target level by the end of the year. I hope that the hon. Gentleman will recognise that since the Bank of England gained its independence in 1997, the UK has had the best inflation performance for almost a century.

Alliance Trust recently reported that the poorest households in the UK face an inflation rate as much as a third higher than the average. That comes hot on the heels of Institute for Fiscal Studies research indicating a real increase in poverty in this country in the past year. Does the Minister share the concerns expressed by some of his colleagues running for the deputy leadership of the Labour party about the rising inequality under this Government?

One of the best and most important things for families, particularly those on lower incomes who aspire to be able to afford their own homes, are low and stable interest rates, which come with low and stable inflation. That is one of the reasons that this country now has 1.8 million more homeowners than in 1997, and it is the reason that we will not return to the sort of policies that we saw under the previous Government and that are advocated by the current Opposition. During the 18 years that they were last in power, average interest rates, for the entire period, were about 10 per cent.

Last year, disposable incomes rose at the slowest rate for nearly a quarter of a century, and yesterday the Office for National Statistics announced that, for the sixth month in a row, regular pay failed to keep up with inflation, so living standards fell again. The Council of Mortgage Lenders has now reported that homeowners are suffering the highest mortgage burden for 15 years. Does the Minister agree that life is getting much tougher for thousands of hard-working people after the Chancellor’s 10 years in office? People are already struggling with 101 stealth tax rises, and many of them are also hit by the chaos in the tax credit system.

The hardest burdens for many families to bear are interest rates that run out of control, which they experienced under the previous Government, and inflation running out of control, which they also experienced under the previous Government. In contrast, the consumer prices index of inflation remains low by historical standards, at 2.5 per cent.—incidentally, it fell by 0.6 per cent. last month. Consistent with the Treasury’s forecast in the Budget, and with the Bank of England’s May inflation report, independent forecasters expect inflation to return to its target level by the end of the year.