HC Deb 20 June 1968 vol 766 cc1304-6
3. Mr. Hunt

asked the Prime Minister what reply he has sent to the letter he received on 9th May from seven economists, headed by Mr. Edward Holloway, on the causes of the current inflationary pressures within the economy.

The Prime Minister

I have arranged for my correspondence with this group of political economists to be placed in the Library, Sir.

Mr. Hunt

Is it not a fact that these distinguished economists drew the Prime Minister's attention to the worldwide lack of confidence in Britain arising from our continuing failure to contain inflation? Does not the Prime Minister feel that the latest depressing figures of industrial production, coupled with the ever-rising trend of Government expenditure, give compelling evidence of the validity of the case which these economists are making?

The Prime Minister

I thought that these very distinguished political economists succeeded in putting into economic jargon some of the more ignorant shibboleths of hon. Gentlemen opposite. On the specific point raised by the hon. Gentleman, he will have seen, as I think I said in my reply, that the Organisation for Economic Co-operation and Development shows that ours is neither the most highly taxed country, nor does Government expenditure absorb more of our resources than in many other countries in comparable circumstances.

Mr. Cant

Perhaps I might remind hon. Gentlemen opposite that the 13 halcyon years of Tory rule are the most dramatic refutation that we have of the public expenditure thesis. In the first five years when public expenditure fell from 40 per cent. to 36 per cent. of national income there was a growth rate of 2 per cent. When it rose from 36 per cent. to 40 per cent. the growth rate was just under 3 per cent. If the Friedman Chicago school of monetary theory is laughed at in the United States, why should we take it seriously here?

The Prime Minister

I think that all those considerations are extremely germane to the correspondence which I have had with these economists, but I do not think that it is for me to add to the enlightenment which my hon. Friend has been giving to hon. Gentlemen opposite, except, on the point of Government expenditure, to say that out of every 10 proposals which we make for cuts in Government expenditure the Opposition vote against nine, and campaign against all 10.

Mr. Turton

Will the Prime Minister make clear whether he agrees or disagrees with the verdict of these economists that the prime cause of inflation has been the fact that in the last three years deficit expenditure to the amount of more than £3,000 million has been covered not by borrowings from the private non-bank sector, but by the central banks?

The Prime Minister

I should not use the word "verdict" about an ex-parte statement by these economists. The answer to the right hon. Gentleman's question is, "No, I do not agree with their analysis or their conclusions".