£Sterling (Value) (Hansard, 5 July 1973)

§ 1. Mr. Skinner
asked the Chancellor of the Exchequer what, on the basis of the General Index of Retail Prices, is the purchasing power of the £sterling now, taking it as 100p on 18th June 1970.

§ 24. Mr. Carter
asked the Chancellor of the Exchequer, taking the £sterling as 100p on 18th June 1970, what is its current value to the latest possible date based on the General Index of Retail Prices.

§ 27. Mr. Kaufman
asked the Chancellor of the Exchequer what, on the basis of the General Index of Retail Prices, is the purchasing power of the £sterling now, taking it as 100p on 18th June 1970.

§ The Minister of State, Treasury (Mr. John Nott)
Since 18th June 1970 the personal disposable income of the British people—and that is the best available measure of their true purchasing power—has increased one and a half times as fast as prices. The fall in the value of the pound from 100p to 78½ p in May 1973 must be related to the rise in pensions and wages, and the reductions in taxation, over the same period to provide a meaningful picture.

§ Mr. Skinner
Is the Minister proud of those figures? Does he not realise that they are a fitting testimony to the pledges that were given at the General Election that the Tories would be able to look after the people's money better than the Labour Government did? Will he encourage his right hon. Friend the Chancellor of the Exchequer not to solve the problem in the same manner as he attempted by building society subsidies to get over the 10 per cent. interest rate? He will not get rid of the real problem facing this country by the Walter-Mitty-like sequences in which he was involved when he jumped out of the bath and told the Prime Minister that he had a plan to solve it.

§ Mr. Nott
The Government have every reason to be proud of their economic record. The standard of living of the British people has already risen far more in the three years of Conservative Government than it did in the whole six years of the Labour administration.

§ Mr. McCrindle
I agree that the purchasing power of the pound is very important, but is not it true that so, also, is the proportion of each pound that is retained, after tax, by the average wage earner? When being asked, in the future, to give the present values of the purchasing power of the pound, should not my hon. Friend also be asked to give the other figure alongside it?

§ Mr. Nott
I felt that on this occasion it would help to give hon. Members of the Opposition a simple explanation of the difference between the cost of living and the standard of living. The real disposable income of the British people has grown at a far faster rate during the period of the present Government than it did during the period of the Labour administration.

§ Mr. Carter
Is the Minister aware that while the fall in the internal purchasing power of the pound is quite dramatic, the fall in its external purchasing power is staggering? Is he aware that, since June 1970, against the franc the pound has depreciated by 20 per cent., against the mark by 30 per cent. and against the guilder by 25 per cent.? If this record is maintained, is the Minister aware that it will not be a question of how many 697 francs we get for a pound but how many pounds we have to exchange to get a franc?

§ Mr. Nott
There has been a general shift in the relationships of one currency to another. That is perfectly correct. But the present rates of other currencies may not persist, and we should not draw conclusions about the strength of sterling from recent movements in the exchange rate.

§ Mr. Tugendhat
Does my hon. Friend agree that the great successes of the motor industry based in the constituency of the hon. Member for Birmingham, Northfield (Mr. Carter) owe much to the competitiveness which it has derived from the changing value of the pound?

§ Mr. Nott
Certainly. I agree with my hon. Friend. The competitive position of the motor industry, in relation to its exports, has been enhanced.

§ Mr. Kaufman
Is the Minister aware that the embarrassed obscurity with which he veiled his shameful admission that the purchasing power of the pound has fallen to 78½p under the present Government marks the death knell of official price control in this country, with Sir Arthur Cockfield of the Price Commission as chief undertaker? Is the Minister further aware that if the Government cling to office until the last humiliating moments, as they did in 1964, the value of the Tory pound will sink to 63p?

§ Mr. Nott
The hon. Gentleman will be interested in the recent National Institute review, which pointed out that the Government's counter-inflation policy had met with considerable success. It should be remembered that between November and May raw material prices rose eight times as fast as they did in the corresponding months of the last year of the Labour Government, and seasonal food prices rose half as fast again, yet the rise in retail prices was about the same in the two periods. That testifies to the success of our counter-inflation policy.

§ Mr. Powell
When has my hon. Friend known the NIESR to be right?

§ Mr. Nott
I have every hope that on this occasion the National Institute's more optimistic forecasts will prove correct.

§ Mr. Healey
Does the Minister of State agree that the increase in real disposable income to which he referred took place in the first two years the Government were in power entirely as a result of wage increases which the Government did their best to stop and that during the months since the wage freeze was introduced prices, as he has had to admit today, have been rising at the rate of 9 per cent. a year, but earnings have been rising at under 8 per cent.?

§ Mr. Nott
The right hon. Gentleman's statistics are not quite correct. As he says, during the standstill earnings were held back but, despite this, there was a further rise of 1½ per cent. in real personal disposable income per head in the fourth quarter of last year. As the National Institute's forecast seems to be figuring in the discussion on this occasion, I should say that it predicts—I hope that it will be correct—a further substantial rise in real disposable incomes this year.

§ Mr. Ian Lloyd
Does my hon. Friend agree that a most grotesque and vivid example of all the policies which have been advocated by hon. Members opposite is to be found in Chile, where the currency has depreciated by well over 100 per cent, in nine months?

§ Mr. Grimond
If the Government are really proud of this policy, they must be dangerously crazy. Are we not now in a state of statutory inflation, fed by the Government themselves? Does not the Minister agree that no free society has sustained a loss of value of its currency at this rate without having a first-rate political crisis?

§ Mr. Nott
It would be more easy to answer the right hon. Gentleman's supplementary question if he could make a specific charge to which I could give a specific answer. I do not agree with his generalised criticism.