COST INFLATION AND UNEMPLOYMENT

HC Deb 18 May 1971 vol 817 cc1077-80

Q6. Mr. William Hamilton

asked the Prime Minister how many letters he has received in the last six months about the relationship of cost inflation to unemployment; and what reply he has sent.

The Prime Minister

The information is not available, since statistics of this kind are not kept. But many of my correspondents recognise that inflationary wage claims lead to rising prices and increased unemployment; and I agree with them.

Mr. Hamilton

The right hon. Gentleman continues to make that assertion without a scintilla of evidence. Does he not recognise that the highest unemployment is in precisely those areas where there is no cost inflation and where wages are very much lower than in other parts of the country? Will he say when his Government intend to accept complete responsibility for the criminally high and rising unemployment that we shall see in the coming months?

The Prime Minister

I stated the contents of the letters, which is what the hon. Gentleman asked for in his Question. This is the view of a very large number of those who write to me. The country recognises more and more the truth of this matter.

Mr. Lane

As it was the present Leader of the Opposition who, in 1966, told the T.U.C. that wage restraint was the only guarantee against unemployment, will my right hon. Friend agree that it is high time that the right hon. Gentleman started to re-educate his hon. Friends?

The Prime Minister

I agree with my hon. Friend. I made a reference to the Leader of the Opposition the other day on this matter, and the right hon. Gentleman nodded in agreement and in no way differed.

Mr. Harold Wilson

I gave that warning on a number of occasions in the context of a balance-of-payments deficit, not in the context of a balance-of-payments surplus. Is the right hon. Gentleman aware that what is puzzling most people is that, with a balance-of-payments surplus of £600 million—which he denied last year—instead of using it for expansion and a reduction of unemployment, he is using it for policies of increased unemployment?

The Prime Minister

While we are always grateful for anything which appears to be a new thought from the Leader of the Opposition, it is surely a strange one that, with a balance-of-payments surplus, we can thereby justify inflationary wage claims.

Mr. Tugendhat

Does my right hon. Friend agree that the balance-of-payments surplus is in this sense irrelevant in that the main damage done by inflation is to redistribute wealth from the weak to the strong and that high wage claims make it much harder for those who are not members of trades unions and for those on fixed incomes and earning small incomes?

The Prime Minister

It is this which causes social injustice. In fairness to the Labour Party and to many hon. Gentlemen opposite sitting below the Gangway, it was a point which they constantly emphasised against their own Government's compulsory prices and incomes policy.

Mr. Heffer

Is it not clear that the surplus will be used by the Government for entry into the European Economic Community? Is it not also clear that the right hon. Gentleman and the Chancellor of the Exchequer have not given one shred of evidence on the point that high wages lead to increased unemployment? Will the right hon. Gentleman give us the names of the firms, the industries, and the factories which have had unemployment as a result of high increases in wages?

The Prime Minister

It was the hon. Gentleman's right hon. Friend, the Chancellor of the Exchequer in the previous Administration, who emphasised, quite rightly, in his Budget speech that the balance-of-payments surplus was required in part for the repayment of debt, which is still the case, and in part for the transitional period if this country were to become a member of the European Economic Community. I should not have thought that there was any difference between us on that point.

Concerning redundancies, anybody who has any connection with industry knows full well that high wages are the cause of unemployment.

Mr. Harold Wilson

The right hon. Gentleman is now getting into the same fallacies as his noble Friend the Lord Chancellor when he said that Hitler came to power because of inflation when it was because of the deflationary policy of the German Government. Is not the reason for unemployment in this country today not inflation but the deflationary policies of the Government.

The Prime Minister

That cannot be the case, because they are not deflationary policies.