§ I now turn to the position on inflation. As a result of our policies, the rate of price increases has been held below the level it would have reached and the weakest members of the community have been given special protection. We have introduced food subsidies, frozen rents, and the measures I took in July had price reduction as their central theme. In addition, we have had some relief from rising prices on some of our imported raw materials like copper, rubber and fibres. Sir Arthur Cockfield's recent report records easing of inflationary pressures. These are hopeful factors.
§ Bad harvests in the United States and elsewhere make it impossible to count on the fall in food prices which we expected a few months ago, and oil prices have risen yet again in recent weeks. I do not need to mention the continuing rise in the world price of sugar, which has already increased six-fold in the last 12 months. Nevertheless the rôle of import prices in generating inflation in Britain is likely to be a good deal smaller next year than over the last 12 months. The most important single factor in determining the rate of inflation will then be the rate at which earnings rise. If settlements can be confined to what is needed to cover the increase in the cost of living, we can reasonably expect to see a decrease in the rate of inflation in the coming year.
§ Otherwise we risk losing our ability to compete in foreign markets and to protect the weaker members of the community. Moreover, if wages rise beyond the limits set by the TUC, the Government will be compelled to take offsetting steps to curtail demand. And the effects on the financial position of the company sector are bound to lead to unemployment, as Mr. Jack Jones pointed out in a powerful speech the other day.250
§ In the last eight months the Government have sought to protect those individuals who are least able to bear the impact of inflation by subsidies on basic foods, by freezing council rents, by selective rate reliefs, by increasing retirement pensions and other social benefits, by raising the tax threshold and by lending £500 million to the building societies. We have not so far taken comparable action to deal with the effects of inflation on industry, whether public or private. I shall address myself to this aspect of the problem when I outline the Budget proposals, but I will deal here with an aspect often neglected—the effect of inflation on the Government accounts as a whole.