HC Deb 02 April 1968 vol 762 cc148-9
3. Mr. Sheldon

asked the Chancellor of the Exchequer what estimate he has made of the effect of the prices and incomes policy upon the rate of inflation.

Mr. Roy Jenkins

I would refer my hon. Friend to my Budget Statement.—[Vol. 761, c. 251–302.]

Mr. Sheldon

Is it not a fact that an essential part of the prices and incomes policy lies in its reduction of the level of inflation? If this figure is not known, how can it be assumed that industrial unrest will be paid for by the advantages that control of income would be likely to bring about?

Mr. Jenkins

My hon. Friend is mistaken if he assumes that it is only if something can be exactly quantified that it is of importance. The importance of the prices and incomes policy relates not only to its effect on the level of inflation, its effect on demand, but also, and perhaps even more substantially, to its effect on costs.

Captain W. Elliot

Is not the objective of the right hon. Gentleman's policy in raising prices to cut consumption?

Mr. Jenkins

No, Sir. It is inevitable in the post-devaluation situation and as a result of my decision in the Budget to use largely indirect taxation that there should be some increase in prices. However, it is not my policy that increases in prices which are not necessary and justifiable should take place.

Mr. Higgins

Are we to understand that the Budget judgment was made without any quantified assessment of the post-devaluation period already having been made?

Mr. Jenkins

No, Sir.

Mr. Barnett

What is my right hon. Friend's estimate of the rate at which wages will be kept down by having prices and incomes legislation?

Mr. Jenkins

I am not able to give an exactly quantified estimate of that sort, but I think that it can make a substantial contribution both in dealing with the demand problem and, as I said, still more importantly, in dealing with the cost problem.

9. Sir G. Nabarro

asked the Chancellor of the Exchequer what estimate he has made of the effect of increased taxation in his Budget proposals on the cost of living index during the year 1968; and what effect he calculates this will have on the prices and incomes policy.

Mr. Roy Jenkins

About 1½ per cent. This was taken into account in the formulation of the prices and incomes policy.

Sir G. Nabarro

Having regard to the fact that the norm for increase in incomes is said by the Chancellor to be 3½ per cent. and it is now obvious that in 1968 thy; increasing cost of living will be two or three times that amount, are not these two considerations mutually incompatible? How can the incomes policy proceed en a basis of such shifting sands?

Mr. Jenkins

First, the 3½ per cent. is not a norm. Secondly, I do not accept the extravagant estimates of the hon. Gentleman about the rise in the cost of living.

Mr. Orme

If on my right hon. Friend's own calculations there is to be a gap of at lea it 3 per cent. between prices and real earnings and this will mean a real reduction in the earnings of workers, would he not accept the T.U.C. figure of expansion to 6 per cent. both in growth of productivity and also in incomes?

Mr. Jenkins

The latter part of the question, although important, is slightly distinct from the first part and also from the Question to which it was a supplementary question. I want to see the highest rate of growth we can get compatible with it being an export-led growth and not a consumer-led growth. It is not possible in those circumstances to go ahead quite as fast as my hon. Friend would like.