asked the Secretary of State for Prices and Consumer Protection when he intends next to meet the Director General of Fair Trading.

asked the Secretary of State for Prices and Consumer Protection when he plans next to meet the Director of Fair Trading.

Tomorrow.

Will the Minister ask the Director General what progress is being made in his discussions with the building societies on the introduction of a joint valuation and structural survey scheme for potential house purchasers? Is the Minister aware that the scheme is now in its seventh draft and that the discussions have been rumbling on for about 18 months? When does he expect the scheme to be introduced?

I understand that the Office of Fair Trading and the building societies are likely to reach agreement in principle very shortly. I shall then make an announcement.

When the Minister meets the Director General tomorrow will he ask him whether it his intention to intervene in the case of Leisure Arts to deal with the anomalies and so-called malpractices?

If the Director General wishes to take action, he has adequate powers under part III of the Fair Trading Act. However, I am not aware of any breaches of the law which have come to his attention.

When the Minister meets the Director General will he congratulate him on the work that he and his Department are doing and ask what further plans he has for extending the protection of the consumer against exploitation?

That is a wide matter, but I shall certainly put the question to the Director General.

asked the Secretary of State for Prices and Consumer Protection when he intends next to meet the chairman of the Price Commission.

asked the Secretary of State for Prices and Consumer Protection when he expects to meet the chairman of the Price Commission.

The chairman of the Price Commission and I meet frequently. No firm date has been set for our next meeting.

Although several factors contributed to the decision, does not the Price Commission's 12-month freeze on British Oxygen prices cast some doubt on denials that the Commission is acting as a sanction in support of the Government's pay policy? In this connection, was not the Secretary of State's speech to Lancaster Labour Party a fortnight earlier highly significant? In that speech he linked the importance of private sector pay settlements to inflation in the next few months with the increased powers recently given to the Price Commission.

The hon. Gentleman continues in vain his efforts to demonstrate that I direct the work of the Price Commission. I do not, nor am I able to under the law. What the report into British Oxygen demonstrates is that all costs contribute to prices, including wage costs. If that comes as news to the hon. Gentleman, it does not to anybody else.

Will my right hon. Friend tell the Chairman of the Price Commission that it is about time he started using his powers to freeze prices instead of standing by and watching profiteers exploiting ordinary working people? For example, why were Scottish & Newcastle Breweries Ltd. allowed a recent increase of 3p on a pint of beer when that company's pre-taxed profits for last year alone amounted to £35 million?

I suspected that that was the supplementary question which my hon. Friend would ask. The powers of the Price Commission enable it to make discretionary investigations of price applications and to make judgments about where an investigation is justifiable and whether a price increase could be justified, against the criteria that have been set down by the Act. It is not for me to interpret how the Price Commission acts in relation to individual companies. We must assume that in the case to which my hon. Friend referred the Commission decided that an investigation or freeze was not within the terms of the Act. In the case of two other breweries, where the action sought by my hon. Friend was taken, we must assume that the Commission judged that that was within the terms of the Act.

Is the Secretary of State aware that in almost every Price Commission report to date the Commission has commented on the management efficiency of the company under investigation? Will he ask the chairman of the Commission to define management efficiency? If the Commission does not do so, does the Minister believe that it is qualified to comment upon it?

I do not believe that to be a task which I can impose rightly on the chairman of the Price Commission.

Will my right hon. Friend accept that if the Government are goaded by the Opposition into switching from direct taxation to indirect taxation, in the next Budget or any other, that will increase prices? Will he resist any moves in that direction in every capacity in which he serves?

The Budget judgment and intentions are not matters for me. The Chancellor of the Exchequer is as well aware as is my hon. Friend that any increase in indirect taxes increases the cost of living and the cost of people's normal purchases. On the other hand, my right hon. Friend's principal obligation on inflation is to run the sort of economy that holds prices down and beats inflation in the long run. He has to balance the alternative obligations, all of which lead to the same end.

The Secretary of State referred earlier to management efficiency. As he is meeting the chairman of the Price Commission tomorrow, will he discuss the amount of management time that is wasted inefficiently in dealing with Commission inquiries? Why does the Commission send out detailed questionnaires and follow them up with detailed questionnaires from the consultants it employs? Why cannot the Commission be more efficient?

The hon. Gentleman ought to give some hard examples rather than make general allegations. A number of companies that have been investigated by the Commission have published their appreciation of the way that the Commission works and endorsed its judgment. If the hon. Gentleman wants to give examples of unnecessary questions and time being wasted, he should state them specifically, instead of making general allegations.

I will.

asked the Secretary of State for Prices and Consumer Protection what was the percentage movement in the retail price index in the last two quarters of 1978.

Compared with the previous quarter, the retail price index rose by 1·7 per cent. in both the third and fourth quarters of 1978.

In view of those figures and the likely figures for January and the first quarter of this year, why are the Government so confidently promising the public that inflation will not go into double figures again this year? What factors have the Government taken into account in making that rather rash promise?

When the hon. Gentleman reads the figures in Hansard he will find that they are not as bad as his prepared supplementary question anticipated. The Government's reasons for what we have said about double-figure inflation are clear. It still remains within the power of the people and the Government to keep inflation at or about its present level. The decision about that is one for the Government and the people in partnership. We hope that the people, particularly through the wage claims that they will be pursuing in the next month or two, will demonstrate their determination to keep inflation within manageable proportions.

Does my right hon. Friend agree that the fundamental factor in this matter is the strength of the economy and the fact that the pound is therefore remaining strong? Does he agree that this will be reflected in costs and, therefore, wholesale prices in coming months, and that it is a common belief among most forecasters that inflation will not only remain in single figures for the rest of this year but will be considerably lower than some of the previous forecasts?

The facts to which my hon. Friend has referred are important. The pound remains strong and is stronger than it has been for the past two years. That will clearly have a beneficial effect on import prices and, therefore, on the rate of increase of inflation in general.

As the rate of inflation has now established a clear upward trend, with a return to double-figure inflation being widely forecast, will the Secretary of State admit that the Government's counter-inflation policy is in ruins and that a further upsurge in inflation is likely as a result of the increase, among other things, in local authority rates, particularly the increases being proposed by Labour local authorities?

I agree with hardly anything that the hon. Lady said. Her forecasts of the changes in the rate of inflation have been uniquely bad over the past two years.

They have not.

I apologise. The hon. Lady is right. Her forecasts have not been uniquely bad. The Leader of the Opposition said on Saturday that the Government's vaunted single-figure inflation rate was a nine month wonder—when it had already been in single figures for 13 months. Someone is even worse than the hon. Member for Gloucester (Mrs Oppenheim) in these matters.

asked the Secretary of State for Prices and Consumer Protection what change has taken place in the rate of inflation between January 1976 and January 1979; how this compares with January 1971 to January 1974: and if he will give comparable figures for the Federal Republic of Germany and the United States of America.

Between January 1976 and 1979, the annual rate of inflation in the United Kingdom fell from 23·4 per cent. to 9·3 per cent. Between January 1971 and January 1974 the rate rose under the previous Administration from 8·5 per cent to 12 per cent. The annual percentage inflation rates in January 1971, January 1974 January 1976 and December 1978 for West Germany were 4·2, 7·4, 5·3, 2·4 and for the United States of America were 5·2, 9·4, 6·8, and 9, respectively.

Does my hon. Friend agree that those long-term figures demonstrate the poor record of the Conservative Party on inflation and the considerable achievements of the present Government, with the co-operation of the trade union movement and working people generally?

I agree with my hon. Friend that the inflation that the Opposition induced during their period of office was largely their own responsibility, and particularly the responsibility of the then Chancellor of the Exchequer, Lord Barber.

Can the Minister remind me and the House about the strange, missing two years? Which Government were in office between February 1974 and January 1976? Did the Minister support them?

The hon. Gentleman seems to have no memory at all.

asked the Secretary of State for Prices and Consumer Protection whether he has made any representations to the EEC concerning the level of prices.

I frequently attend meetings of the Agriculture Council. The Government have consistently made clear their strongly held view that the common price level in the EEC is too high.

What has the Common Market actually done to help bring down prices in this country?

It is reckoned that food prices are about 10 per cent. higher than they would be if we were not members of the EEC, but my right hon. Friend the Minister of Agriculture, Fisheries and Food is negotiating to try to eliminate the surpluses and excessive common price increases. It is hoped that that will help to stabilise the trend which is wholly unacceptable to the Government. As a footnote to that answer, there is an EEC subsidy on butter which is worth 5p per pound.

Does my hon. Friend agree that, apart from the inflationary policies carried out by the Opposition when they were in office, one of the reasons for the dramatic increase in prices was that we entered the Common Market? Does he agree that it is only now that some of those prices are beginning to level out, at a much higher level than they should have been in the first place?

Food prices have increased as a result of our joining the EEC. That was brought about in part by our having to move through five stages of increases to price levels that were more approximate to those of the Community. That was understood and predicted to be inevitable when we took the decision and the country voted in the referendum to remain in the Community.

Is the Minister aware that when the cost of living rose in 1978 by 8·4 per cent., only 0·4 per cent. of that was due to the 7·5 per cent. devaluation of the green pound, whereas twice as much—0·8 per cent.—was due to an increase in car prices? Does he not believe that we must have an increase in British agricultural output if we are to maintain a steady supply of food to consumers and to sustain our balance of payments in the coming years?

It is certainly the Government's policy, as described in the recent White Paper, to see increased agricultural production where it can be achieved efficiently and competitively. For that purpose, it is necessary that from time to time farmers' support prices be increased. That is a recognised part of the Government's policy.

asked the Secretary of State for Prices and Consumer Protection whether he will direct the Price Commission to include in its next report an analysis of the factors used in its decisions on disallowing price increases, including whether or not productivity schemes have been found not to be self-financing.

No, Sir. The Price Commission Act 1977 gives me no powers to direct the Commission as to the matters to be included in its quarterly reports.

Does the Secretary of State agree that if, as seems to be indicated by the recent report on the British Oxygen Company, the question whether a productivity deal is self-financing will become a critical factor in a Price Commission decision, two points follow? The first is that it would be illogical to make that decision binding for 12 months, because clearly within that period productivity could change dramatically. The second is that if the private sector is to suffer from this it will need to be very much reassured that the public sector monopolies' so-called productivity deals are equally rigorously scrutinised.

I regard it as a matter not of suffering but of simple common sense. If a company accepts a further financial obligation and increases its costs in a way that at one time it suggests will not result in increased prices, but it then admits has resulted in increased prices, it should have no automatic right to pass on those increased prices to its customers. That seems to me to be elementarily true and elementarily right.

Will the Secretary of State bear in mind what my hon. Friend the Member for Pudsey (Mr. Shaw) said about firms that feel that they waste a great deal of time dealing with the Price Commission? Will he do so particularly in the case of Metal Box, which merely passed on the increased price of tinplate from the British Steel Corporation? There was no additional increase, but a great deal of time was spent looking at that increase in price, which was obviously allowed because the Government had agreed to the price increase by the BSC.

The case of Metal Box demonstrates a number of morals that we should draw from Price Commission investigations. Not the least is that one of the reasons why that investigation came about was that pressure was brought to bear by the Food Manufacturers' Federation which said that it wanted an inquiry into tinplate prices and the prices of the containers in which its members sold their wares. One moral to be drawn is that the Commission should be allowed to make its own judgments, rather than have investigations imposed on it by vested interests of one sort or another.

Does the right hon. Gentleman agree that there is also a moral to be drawn on the subject of disallowed prices? Would he care to comment on the position with regard to paraffin, where a controlled price agreed between his Department and the Secretary of State for Energy has resulted in the wholesale price going up but the retail price being fixed? As a consequence there is now a grave shortage of paraffin in certain parts of the country because distributors no longer find it profitable to sell or stock it. Is not this, too, something that the Secretary of State should investigate?

In principle, I am not attracted by the idea of controlled and fixed prices. I much prefer to allow a freer system of price determination to come about, and when it is not free, because the price is determined by monopolies rather than competition, I am in favour of the Price Commission's examining the circumstances in that particular case. Therefore, the hon. Gentleman's general point receives some sympathy from me, but I do not think that the conclusion that he draws about the specific example is correct.

asked the Secretary of State for Prices and Consumer Protection what are his forecasts for price inflation, as measured by the retail price index, in the coming year.

asked the Secretary of State for Prices and Consumer Protection what estimate he has made of the likely trends in the retail price index up to the end of 1979.

asked the Secretary of State for Prices and Consumer Protection what is his current forecast of the date on which the 12-month rate of increase in retail prices will rise above 10 per cent.

The Government's short-term economic forecast was published on 15 November 1978. Such forecasts are of course conditional upon a number of financial and economic factors—not least the growth of earnings.

I am grateful for that answer, but is the right hon. Gentleman aware that I ask that question now because there have been a number of changes in the economy since that forecast was made? It is most disappointing not to be able to receive a specific answer. May I ask the right hon. Gentleman now to give me a specific figure of the latest forecast increase in relation to this question?

As the hon. Gentleman must know, it is not possible to give a precise estimate of the sort that he wants, although, as part of the Budget, the obligations placed upon my right hon. Friend the Chancellor of the Exchequer to publish a forecast will mean that a more up-to-date figure is provided. All that I can tell the hon. Gentleman—and I hope that he and the country will believe this—is that it remains possible that we can keep inflation at or about its present level. But that requires the wholehearted cooperation of industry as a whole, the British trade union movement and all those who contribute to the causes of increased inflation or stable inflation.

How does the Secretary of State explain the fact that in Abertillery on 28 November 1978 he said that it was possible to forecast five to six months ahead because of factors that were known to his Department? Is not his newfound modesty largely due to the fact that he knows all too well that inflation will be back in double figures before very long?

The hon. Gentleman was one of those who at the time of the Abertillery forecast announced that I could not make predictions with such accuracy. In fact, what I said then turned out to be exactly right. We achieved single figures in the early months of last year and we remained at or about that figure for the following year. What was different then from now is very clear. The overall level of earnings is not easy to predict and is not easy to determine. If it remains at the reasonable level advocated by the Government we can have another good year of inflation outturn. If not, inflation may well accelerate again. What I am reminding the House of today is the importance of holding down those costs that might accelerate the retail price index. I hope that Opposition Members will support us in making that point.

Can my right hon. Friend tell the House the extent to which the no doubt approximate estimate of future price increases is attributable, first, to wage increases; secondly, to factors external to the British economy; and, thirdly and very important, to those factors that are directly under the Government's control?

Of course, there are some external factors. My hon. Friend would not expect me to pretend otherwise. The potential increased cost of imported oil is an obvious example. But I must tell my hon. Friend this about the other two categories. Those factors that can be determined by the Government—the control of the money supply and the limit on the expansion of the public sector borrowing requirement—have been moving in the right direction for the past two years. In all those particulars the Government have acted in a way consistent with our inflation targets. That leaves wage costs, which are a substantial contribution to every price increase. For the rest of the year they will determine our inflation by the end of 1979 and the early months of 1980.

The Secretary of State is very good at blaming the Government's appalling record of rising prices on everybody else and everything else, particularly wage costs. Will he now tell us what proportion of the increased inflation that is expected is due to the Government's inability to control their own spending to keep it within what they are prepared to raise in taxation?

I said a moment ago, and I repeat, that the Government have a better record over the public sector borrowing requirement, domestic credit expansion and the money supply than our predecessors. If the hon. Gentleman has any doubts about that, I suggest that he reads "An End To Promises" written by one of his hon. Friends, who described the problems faced by the previous Government in the dying days of that Administration in terms that I have used to describe them at previous Question Times.

How can the Secretary of State reconcile the fact that the trend in inflation has been rising steadily for the past three months, at least since last November, with his own optimistic statements in June and November last year to the effect that 1979 would be another successful year in terms of containing inflation? As he appears to be having some difficulty in making long-term forecasts, may I offer him the services of Conservative research department statisticians to explain to him why my forecasts of last year are proving right and his are proving wrong?

I take it that those are the same statisticians as urged the Leader of the Opposition to talk about nine months in single figures four months too late. But, putting that aside, knowing the hon. Lady to be an assiduous student of all my speeches, I always look, on the morning of my Question Time, to see what predictions I have made in the recent past. The predictions I made during the months to which she referred are boringly identical with what I have said today, namely, that inflation during the early part of 1979 was a matter for the British nation as a whole to decide that high wages would produce high inflation rates and vice versa. That is what I said then, and that is what I repeat now.

On a point of order, Mr. Speaker. I should like to provide you with examples of quotations from speeches by the Secretary of State—

Order. I read speeches by right hon. and hon. Members on both sides of the House and keep my opinions to myself.

asked the Secretary of State for Prices and Consumer Protection if he will estimate by how much the devaluation of the £ sterling, since October 1974, has affected food prices.

It is not possible to distinguish the effects of the changes in the exchange rate from the many other factors affecting food prices over the period from October 1974.

Will the Minister accept that, even if he were able to calculate a figure, the position would be much worse were it not for the achievements of the private enterprise oil industry in the North Sea? Will he accept, further, that the present position is directly as a result of Government mismanagement which has made life in this country very much more difficult, especially for those on fixed incomes?

The hon. Member will be aware that so far from the pound sterling having been devalued during the past year it has appreciated against a trade-weighted basket of currencies by 1·4 per cent., which is one of the contributory factors towards the stabilisation of the inflation rate.

Will my hon. Friend congratulate the Minister of Agriculture, Fisheries and Food on his determined battle against devaluation of the green pound, and will he ask him to continue this battle, since it is in the interests of housewives in general?

It is the Government's policy to recognise from time to time that changes in the green rate are inevitable in the wider interest of the economy as a whole. But my hon. Friend is right to point to the determination of my right hon. Friend the Minister of Agriculture, Fisheries and Food to ensure that the interests of consumers and counter-inflation policy are borne very much in mind in the balance against other pressures for change.

In view of the earlier references to the common agricultural policy, does the Minister agree that, notwithstanding the partial recovery of the pound against other European currencies, the green pound differential through the MCAs in effect provides a substantial subsidy to our farm prices, representing one quarter of our contribution to the Community budget?

I recognise that if we were to abandon altogether the present green pound level it would mean a substantial increase in the price of food. I do not know whether that is what the hon. Gentleman is recommending. It would mean an increase in the food index of about 6 per cent.

asked the Secretary of State for Prices and Consumer Protection if he will take steps to monitor the increase of the price of drugs and restrict profit margins, in the light of the 62 per cent. margin on the price to the retailer of PRO-HYD 50 capsules 30.

It is for the Price Commission to decide whether to investigate a particular price increase or the margin of a particular distributor.

Will my hon. Friend see the Price Commission about these inordinate increases? The example which I give in my original question is only one of dozens of similar price rises in pharmaceutical products. Even worse, is my hon. Friend aware that the taxpayer is paying 100 per cent. more for commonly used drugs in the National Health Service than he was a year ago, and that this is a complete twist of the inflationary spiral about which his Department should be doing something?

My hon. Friend will know that the prices of certain drugs are controlled by the Pharmaceutical Price Regulation Scheme and not by the Price Commission. To that extent, therefore, my hon. Friend's question should be directed to my right hon. Friend the Secretary of State for Social Services. To the extent that there are drugs which are not involved in that scheme, they are subject to the Price Commission's examination, and my right hon. Friend directed the Price Commission to examine the prices, costs and margins in the production and distribution of proprietory non-ethical medicines. My hon. Friend will have read that report, and he will recognise that it does not bear out fully all his assertions.

Will the hon. Gentleman recognise that this question has nothing to do with the type of medicines that he referred to the Price Commission? The hon. Member for Brent, South (Mr. Pavitt) mentioned ethical products. However, before referring any matter to the Price Commission, will the Minister draw to its attention the recent report of the Office of Health Economics which said that the chief problem in the NHS was for primary care to be increased, and, concomitant with that, the greater use of drugs and research into drugs? If the drug companies are to succeed they have to be able to market their products properly.

I do not think that removes from the Government the responsibility to scrutinise carefully, through the Pharmaceutical Price Regulation Scheme, the prices of drugs and, in the non-ethical sphere, the Price Commission's responsibility. But I must re-emphasise that it is not a matter on which my right hon. Friend can direct the Price Commission. The Commission is required to investigate at its own discretion where there is a suspicion that a price increase is not justified.

asked the Secretary of State for Prices and Consumer Protection what has been the increase in food prices since February 1974.

In mid-January the food price index had increased by 115·6 per cent. since 1974.

Will the Minister say, in view of that very substantial increase in the cost of food over the past five years, what his estimates are for the increased cost of food over the next 12 months?

All predictions of that kind are fraught with considerable difficulties. That is especially so in the case of food. The price of fresh food, as has been demonstrated by the events of January, is extremely subject to fluctuations due to weather. Seasonal foods vary very much in price from year to year. A very large part of the recent increase has been due to the quite exceptional rise in the price of vegetables.

Although my hon. Friend is reluctant to offer any prediction, has he made any study of Conservative Party policy, such as it is? If so, does he agree that the implications of its policy are that food prices would rise enormously in a matter of months if Britain had the misfortune to have to endure one of its Administrations?

The policy of the Conservative Party on food prices appears to be characterised by a completely unbalanced view that the green pound should be devalued as soon as possible, with all the disadvantages for the economy at large which would flow from that. The Opposition seem not to recognise the damage which would flow from any such sudden jump. The Government's policy is a balanced one bearing in mind both the needs of the producers and the pressures to which consumers are subject.

Does the Minister agree with the head of the Economic Commission that one of the chief reasons for the increase in the price of food has been the vast increase in transport costs?

It is true that the cost of distribution is a major part of the end price paid by the consumer in the shop. A number of studies have been carried out by the Price Commission into the distribution of meat and fish especially. If the hon. Member has in mind a specific problem, perhaps he will draw it to the attention of my right hon. Friend.

Can my hon. Friend confirm that the view of the Conservative Party is identical with that of the National Farmers' Union on all food matters in that it calls for the complete devaluation of the green pound to bring our prices into line with those of other EEC countries? Will my hon. Friend also confirm that it is the Government's resolute determination to support completely the stance of my right hon. Friend the Minister of Agriculture, Fisheries and Food in this year's price round negotiations, whatever the effect it has on our relationships with the other eight nations?

I have noticed that the farming press, which normally speaks with some favour of the Conservative Party, has not spoken with favour of its agricultural policy and indeed on more than one occasion has drawn attention to its absence. But I agree that my right hon. Friend is right to continue the policy which has been the policy of the Government over the past few years to seek balanced alterations in the green currency rate at the appropriate moments. I note what Mr. Richard Butler is reported to have said today. I do not know whether the Opposition are calling for a 15 per cent. devaluation of the green pound, as he has, but the cost consequences for the housewife will have been noted.

Reverting to the supplementary question asked by the hon. Member for Rother Valley (Mr. Hardy), is the Minister aware that the Conservatives' price proposals on agricultural produce to move to common prices would result in a price increase of about 1 per cent. over five years? Bearing in mind what the Government have done with regard to VAT on food, which put up the food index by 4 per cent. at a stroke, who is the housewife's better friend?

The hon. Gentleman is wholly wrong. The effect of eliminating MCAs in the way that he has described would be to put up food prices by about 6 per cent. at a stroke. That is something that no responsible Government could contemplate. Although the needs of the farming community are very much borne in mind by the Government, and have been demonstrated on a number of occasions, it is not possible to insulate the farming community wholly from our rate of inflation compared with that of the Community at large. We cannot hope to achieve common price levels until we have eliminated these disparities in our inflation levels. It is high time that the Conservative Opposition recognised that.

asked the Secretary of State for Prices and Consumer Protection what is the increase in the retail price index, exclusive of seasonal foods, over the last six months, expressed at an annual rate.

asked the Secretary of State for Prices and Consumer Protection what is the average annual rate of increase in the retail price index since February 1974.

asked the Secretary of State for Prices and Consumer Protection how much the retail price index has risen since February 1974.

asked the Secretary of State for Prices and Consumer Protection what is the increase in the retail price index, excluding seasonal foods, over the last six months.

asked the Secretary of State for Prices and Consumer Protection what is the latest year-on-year figure for the percentage increase in the retail price index.

asked the Secretary of State for Prices and Consumer Protection what has been the percentage increase in the retail price index over the past 12 months.

The retail price index has risen at an average annual rate of 15·6 per cent. since February 1974, giving a cumulative increase of 103·7 per cent. The increase over the last 12 months has been 9·3 per cent. The index, excluding seasonal foods, has risen by 4·3 per cent. over the last six months, which is equivalent to an annual rate of 8·8 per cent.

rose—

Order. I propose to call first those six hon. Members whose questions are being answered.

I am grateful to the Secretary of State for that information. Since the Government consider this index the most reliable index with regard to inflation, will he now concede that the Government's claim to be able to maintain single figure inflation throughout this election year is now, unfortunately, entirely bogus? Does he not accept that one way to keep down inflation is to encourage industry? Does he not agree that through various measures which the Government have introduced they have produced disincentives for industry which could make such a contribution to main- taining a low figure of inflation in this country?

No. I believe that it is still possible to maintain the inflation rate, as measured by the RPI, at or about its present level. I share the hon. Gentleman's view that the RPI is the best measure of inflation, which is why I did not draw attention to the final sentence of my answer, which shows that what is popularly called "the underlying rate is falling. I have stuck to the RPI in good times and bad. I have not chosen my index to demonstrate the best figure. I still believe in the RPI, and I believe also that it is possible, so long as the nation as a whole behaves sensibly, to keep inflation at or about its present figure.

Will the Secretary of State tell us how this 103 per cent. compares with the predictions that he and the Chancellor of the Exchequer made during the general elections of 1974? Can he also tell the House which British Government in history have had a worse record than this one on this front?

The elections of 1974 were characterised by an argument concerning how inflation had been created. I share the view—I repeat it—that that was in part expressed by the hon. Gentleman who wrote "The End to Promises" that many of the causes of inflation in 1974–75 were established well before this Government came to power. The important achievement is that over the last two years we have cut the inflation rate by more than half. I believe that we can keep it at or about its present level, and we must struggle to do so.

Is not the increase in me retail price increase since February 1974—to use the Secretary of State's own words—uniquely bad? How much worse is it than the increase under any previous British Government this century?

This is the only British Government this century who came to power facing an increase of 400 per cent. in oil prices, a money supply that was wholly out of control, a public sector borrowing requirement that was expanding and industry that was rent by the divisions caused by the previous Government's industrial policy. For two years we overcame those difficulties, and since then we have managed to reduce the rate of inflation. That is a fact with regard to the last five years.

Modest man that he is, does the Secretary of State agree that since his Government came into office the pound has halved in value, or, to put it another way, that the cost of living has doubled? Modest man that he is, will he admit to any responsibility at all lying with this Government, and, if so, what responsibility?

I have repeated this many times, and I shall repeat it again if it pleases the hon. Gentleman. I suppose that in 1974–75 we could have moved more quickly to remedy the errors of our predecessors. We could have attempted more quickly to get the money supply and the public sector borrowing requirement under control. Perhaps we did not clean up the mess sufficiently quickly, but that is the full extent of our responsibility.

Can my right hon. Friend say what effect increasing television licences has had on the index? Does he favour abolishing the licence and raising the necessary revenue for the BBC from the Exchequer?

I cannot give my hon. Friend the precise figure for which he asks, although it would be in points of decimals. As he knows, the second part of his question is a matter not for me but for my right hon. Friend the Home Secretary.

Would it not be more precise for the Secretary of State to admit that the time for alibis is over and that our record in the last five years, in comparison with other countries, is abysmal, and that even in January our inflation rate was higher than in any other country in the Common Market? Are not higher prices the inevitable consequence of a Socialist Government?

The hon. Gentleman struggles to make his little political point. I must repeat the facts of the matter to him. We reduced inflation from over 20 per cent. to little more than 8 per cent.

To 8·4 per cent.

Exactly, 8·4 per cent. to be precise, if the hon. Gentleman wants to remind us of that figure. We can maintain inflation at the present level, but one thing that would stop our maintaining it at that level would be the inducing of fear in the British people in general and the trade union movement in particular that since inflation is bound to get out of hand they must make pre-emptive wage demands to compensate for the anticipated rises. So long as the Conservative Opposition continue to pretend that inflation will again take off, I believe that they are making it more likely. We propose to tell the truth about inflation, which is that there is a good prospect of its remaining at or about its present level.

asked the Secretary of State for Prices and Consumer Protection what recent representations he has received about the increase in minimum lending rate to 14 per cent.; and what effect he expects that increase to have on the index of retail prices.

None, in both cases.

Does not the Secretary of State agree that the very high level of the Government's borrowing is the principal factor in the very high interest rates? Does he not understand that very high interest rates are wholly hostile to any growth in the economy?

No, the very high interest rates, which I regret as much as the hon. Gentleman, are the result of a combination of factors, some of which are international and some of which are domestic. Having put down his question the moment that MLR went up, I would have hoped that the hon. Gentleman would record his pleasure that it has now gone down again.

Has my right hon. Friend considered referring to the Price Commission the rate of interest offered on the recent issue of Government securities?

No.

Does the Secretary of State accept that high interest rates have a bearing on prices charged by smaller business, the retailer in particular? Therefore, does not he accept that part of the price increases which housewives are experiencing today are a result of the Government's very high public service borrowing requirement, which in the past has driven up interest rates and MLR? However, I welcome the recent small reduction in MLR.

Of course increases in lending rates and the cost of borrowing are contributory factors when price increases come about. But the point that I tried to make a moment ago is that we must try to keep a balance over the economy as a whole. We have kept the public sector borrowing requirement firmly in check, we have stuck to our targets with regard to PSBR and our interest rate policy is a contributory factor in those targets being maintained.

With regard to local authority borrowing, will the right hon. Gentleman blame the shattering increase in rates which will come next month in many areas of the country—which will be far in excess of the Government's targets—on Lord Barber or on the EEC common agricultural policy?

Different authorities have different records with regard to rate increases, and different authorties have different—

Labour authorities.

The hon. Lady cries "Labour authorities". That enables me to make my second point, which is that different authorities also have different records on the provision of services. The cry of "Labour authorities" is appropriate to them as well. As to specific rate increases, the hon. Gentleman must ask the Secretary of State for the Environment, and not me.