HC Deb 21 January 1971 vol 809 cc1271-3
Q6. Mr. Barnett

asked the Prime Minister if the public speech of the Chancellor of the Exchequer on wage inflation on 5th December, 1970, at Sale represents the policy of Her Majesty's Government.

Q7. Mr. Eadie

asked the Prime Minister if the public speech made by the Chancellor of the Exchequer at Sale, Cheshire, on 5th December on wage inflation represents the policy of Her Majesty's Government.

Mr. Maudling

I have been asked to reply.

Yes, Sir.

Mr. Barnett

In view of today's unemployment figures, which are the highest for seven years, should not the Chancellor consider changing both his speeches and policies? If not, are we to assume that the unemployment figures were expected by the Government, or, if that is not the case, are we to take it that the plan is deliberately to increase unemployment?

Mr. Maudling

My right hon. Friend said in November that over the next six months he expected the growth in demand to be broadly in line with the growth in productive capacity. To this forecast, my right hon. Friend still adheres.

Mr. Eadie

Does the right hon. Gentleman agree that the speech was irresponsible to the extent of its unfairness as no reputable economist in this country is prepared to blame workpeople for the increase in inflation?

Mr. Maudling

It is not a question of blaming workpeople. The fact is that the biggest single contribution to inflation in this country is the growth of money incomes. That cannot be denied by anybody. If we merely look at the facts, the purchasing power involved in the growth of incomes is the underlying factor of all inflationary problems at the moment.

Mr. Taverne

In the light of what the right hon. Gentleman said, that it is the policy of the Government to keep growth in demand in line with the growth in productive capacity, does not that imply that there will be no reduction in unemployment? Is this the result that the Government wish to see?

Mr. Maudling

That was from the standpoint of 5th November when my right hon. Friend was speaking. The major problem now is to get under control the inflation which we inherited, which is a bigger danger to this country's economy than anything we have seen in this sphere for a very long time.

Mr. Thorpe

On Tuesday this week the Home Secretary was generous enough to reveal to the House that the Government had a policy for both prices and incomes, and he suggested that they had been successful. If that be so, will the right hon. Gentleman tell us to what other factor he attributes the steep rise in unemployment and whether it comes as a surprise to the Government or was expected?

Mr. Maudling

I think that the monthly figure is higher than we expected; but, as the Leader of the Opposition often said in the past, one should not put too much weight on one month's figures alone. My right hon. Friend gave his forecast for the six months from November. We must come back to the fundamental point. If we are facing cost inflation of very serious dimensions, this can, in modern conditions, be accompanied by a relatively high level of unemployment. We cannot solve the unemployment problem unless we can also solve the problem of cost inflation.

Mr. Roy Jenkins

Is the right hon. Gentleman saying that he believes that an increase in unemployment is likely to help solve the problem of cost inflation?

Mr. Maudling

No, I did not say that. I said, what the Government have said time and again, that if cost inflation continues at the present level a danger of increasing unemployment will arise. All who are involved in wage negotiations must recognise that.