HC Deb 26 January 1971 vol 810 cc294-5
3. Mr. Horam

asked the Chancellor of the Exchequer what measures the Government are at present using to combat price inflation; and what consequences these will have for employment, investment, and economic growth.

Mr. Barber

The Government's policy is to secure a progressive de-escalation of the level of pay settlements, against the background of a firm control of demand. This will reduce the upward pressure on prices and, compared with what would otherwise be possible, will enable us to have higher employment, higher investment and faster economic growth.

Mr. Horam

Surely the Chancellor of the Exchequer must consider it a pretty inadequate anti-inflationary policy which, if it succeeds, on the evidence of his civil servants to the Wilberforce Committee, will allow prices to rise by 6½ per cent. this year.

Mr. Barber

The hon. Gentleman will recall that, when we took office in June last year, prices were rising at a rate faster than at any time since 1951. It is impossible to get the situation right in a few months. But we are doing it, and we are succeeding.

Mrs. Knight

Will my right hon. Friend bear in mind that the reduction or abolition of the petrol tax might be one effective way of combating price increases?

Mr. Barber

At this time of the year, I will bear everything in mind.

Mr. Sillars

Why does the right hon. Gentleman take refuge in jargon? Why does not he tell us that, when he refers to the de-escalation of wage increases, he means cutting the real wages of working people?

Mr. Barber

That is precisely what I do not mean. If the hon. Gentleman looks at the figures, he will find that it is possible to have a de-escalation of the level of wage settlements and, at the same time, an increase in the real earnings of people. That is what we are aiming at, and I am surprised if the hon. Gentleman thinks that the present level of wage settlements is tolerable.

Mr. Redmond

Does not my right hon. Friend agree that the most important contributory factor to inflation was the high level of direct taxation left behind by the previous Government on companies, especially on close companies?

Mr. Barber

There is no doubt that direct taxation contributed to the situation that we inherited. It is also true, as the T.U.C. pointed out in its recently published document, that one of the principal causes of the rate of increase in prices under the previous Government and the holding down of real incomes' effective purchasing power was the increase in indirect taxation deliberately imposed by the previous Government.

Mr. Roy Jenkins

On the point about unemployment, does the right hon. Gentleman endorse the views of his predecessor, Mr. kin Macleod, who, when the unemployment level was a little more than 150,000 lower than it is at present, told us that it was quite unacceptable? What is the right hon. Gentleman's attitude to the present level? Does he intend to bring it down, or does he intend to cure inflation by putting it up?

Mr. Barber

There is no doubt that the present level of unemployment is too high. But of course it must be generally accepted now that the greatest threat to employment is the present level of cost inflation.