Prices and Incomes Policy (Hansard, 27 June 1972)

§ 13. Mr. Ashton
asked the Chancellor of the Exchequer what review he has now made of Her Majesty's Government's prices and incomes policy.

§ 15. Mr. Strang
asked the Chancellor of the Exchequer if he will make a statement on the Government's policy towards prices and incomes following recent pay settlements.

§ Mr. Higgins
We are continuing to urge on both management and unions the need to moderate pay and price increases and to bring home to all concerned the social and economic damage arising from inflation. Both sides of industry are aware of this concern, and the Government hope that the talks taking place with the CBI and TUC will prove helpful in fighting inflation.

§ Mr. Ashton
Can the hon. Gentleman assure us that he will not carefully wait until the rent increases have been made, the value added tax has been imposed and the price of food has shot up because of Market entry, and then come along with a compulsory wages freeze?

§ Mr. Higgins
On the second part of that question, my right hon. Friends the Prime Minister and the Chancellor of the Exchequer have made our position clear. As for the housing finance proposals, they will involve those who can afford it paying fair rents, but they will also introduce rent rebate schemes to help the lowest paid and the less well off. This is very important in the context of wage claims. As for value added tax, my right hon. Friend, in giving reliefs specifically to those main areas of expenditure which bear most heavily on low income families, has taken steps so that there is no reason to suppose that value added tax will be regressive. In both these areas we have taken very much into account the effect of this kind of change on low income families and, correspondingly, on wage claims.

§ Mr. Strang
Have the miners, and now the railway men, ended for good the Government's efforts to de-escalate the rate of increase in wages by holding down settlements in the public sector? Can we look forward to a new initiative in prices and incomes? Will the right hon. Gentleman take into account the fact that trade unions have a responsibility to protect their members against present and future inevitable price increases?

§ Mr. Higgins
The answer to the first part of that question is, "Most certainly 1180 not". In answer to the last part, the hon. Gentleman should look carefully at what has happened to earnings and prices. In the two years to April, 1972, average earnings rose by nearly 25 per cent., while retail prices rose by just over 16 per cent. The answer to the hon. Member's second question is that over half the public sector settlements have been at 8 per cent, arid under, and the average, even including the rail settlement, has been about 9 per cent. There have been setbacks and some settlements have been very high. But it is absolutely essential that we should continue the process of de-escalation if we are to beat inflation and to get the economy on a sound basis.

§ Mr. Wilkinson
If exhortation proves to be ineffective in securing wage restraint, will my right hon. Friend be prepared to adopt more positive measures to ensure that our competitive advantage which flotation has secured is not impaired, and nor is the standard of living at home impaired, by inflation?

§ Mr. Higgins
As I have pointed out, my right hon. Friends have made our position on a statutory policy very clear. It is worth pointing out that the policy which we have adopted over the past two years has been very effective indeed in bringing down the rate of inflation. It is not the case that we should be complacent at the present time; clearly we have a long way to go yet. But we are determined to continue the trend we have established over the last two years, which I spelled out clearly in answer to an earlier Question.

§ Mr. Sheldon
Is it not clear that whatever the hon. Gentleman may say about the success of his policy on prices over the past two years, his view is not borne out by those who have held sterling overseas? The money market that opened this morning showed a fall in sterling, and this is directly attributable to the Government's failure on inflation. Whatever the Government may say, those people who vote with their money in London have decided that the Government have come unstuck. When will the Government change their policy and bring about some credible alternatives?

§ Mr. Higgins
Last Friday, my right hon. Friend the Chancellor spelled out very clearly the relationship between his 1181 proposal to float the £ and the question of inflation. This is common ground throughout the House. None the less, this ought to lead all sides of the House to pursue more rigorously policies against inflation, and there is a considerable degree of schizophrenia on the Opposition benches in encouraging wage claims, on the one hand, and complaining about inflation, on the other hand.