HC Deb 08 December 1975 vol 902 cc16-9
9. Mr. Peter Morrison

asked the Secretary of State for Prices and Consumer Protection what was the 12 month increase in the retail price index at the latest available date.

Mrs. Shirley Williams

The year-onyear figure for the all-items index, which in October was 25.9 per cent., has fallen for the second successive month—the first time that this has happened since May 1972. This deceleration in inflation is expected to become more pronounced as the full effects of the £6 limit work through into the retail price index.

Mr. Morrison

Is the right hon. Lady aware that despite the fact that inflation may not be running at quite the same level as it was three months ago, it is still running at a horrendous level? Does the right hon. Lady agree that so long as public expenditure continues to run at a deficit of something over £10,000 million a year, the retail price index is bound to continue to increase? Will she say what replies to the Chancellor she has made on this matter?

Mrs. Shirley Williams

I do not accept the hon. Gentleman's presumption. First, we have seen a fall for two months running—nothing like as fast as one would wish, but the six-months' figure is 10.4 per cent., which at an annual rate is 21.9 per cent. The three-months' figure shows an annual rate of 12.4 per cent. Although I have never used a particular figure in this House, which is why I have now given the annual rate, the six-months' rate and the three-months' rate, what is indisputable is that there is a steady deceleration in the rate of inflation, and the main reason for that is the restraint which has been shown by those who are in a position to bargain for higher wages. This is unquestionably having a favourable effect on the RPI. I am surprised that the hon. Gentleman should shake his head at what is, up to now, a policy on target.

Mr. Heffer

As the trade unions have accepted the £6 limit, what action will the Government take in relation to other reasons for inflation, because plainly the question of wages is not the whole content of inflation?

Mrs. Shirley Williams

I do not think that I have ever suggested that it was. It is simply one factor, and as this factor improves there is an effect on the RPI. There are other factors. For instance, the rate of increase in respect of certain commodities has slowed down compared with the position a year ago. This is helpful. Also, there have been signs of a decelerating rate of increase in rates and matters of that kind.

Mr. Lawson

Does the right hon. Lady accept that the imposition of import controls would, of necessity, raise prices? What is her Department's position about import controls, and what representations has she made to her right hon. Friends who are concerned with other aspects of this matter?

Mrs. Shirley Williams

The hon. Gentleman will not expect me to reveal what has taken place at Government discussions, but he knows, as I know, that import controls have a slight effect on prices, though it depends on the length, breadth and items content of any such controls.

Mr. Lipton

Is my right hon. Friend aware that the retail price index contains quite a number of items which old-age pensioners and people on low fixed incomes either cannot buy or do not want to buy? To that extent, the figures of the retail price index are not as applicable to this section of the population as may be thought.

Mrs. Shirley Williams

My hon. Friend is quite right. He will appreciate, however, that it would be a grave mistake to change the retail price index, which has been accepted by both sides of industry. The pensioner index shows very much the same sort of deceleration as the all-items index.

19. Mr. Brittan

asked the Secretary of State for Prices and Consumer Protection if she can assess the effect which the voluntary price agreement in the summer had on the retail price index.

Mr. Alan Williams

The voluntary price limitation agreement with manufacturers and the retail trade, which ran initially from June 1974 to March 1975, was designed to hold down the prices of an agreed "shopping basket" of household essentials, mainly foods. It was introduced after the gross margin ceilings permitted under the Price Code for distributors had been cut by 10 per cent. Over this period, the index of items in the agreement increased by about 13 per cent. compared with 19 per cent. for the retail food index. Although the agreement was then extended until June, both parties recognised that the scope provided by the 10 per cent. cut had by then been eroded by the increase of retailing expenses.

Mr. Brittan

Is it right that for the money with which it would have been possible to fill the Secretary of State's famous shopping basket at the time, it would now be possible to fill only two-thirds of the basket?

Mr. Alan Williams

Whether or not that is so, I assume that the hon. Gentleman is keenly supporting any action that will help to restrain inflation. I hope that we shall have his support if we have to bring in any further legislation.

Mr. Marten

Does the Minister recall that in a previous answer the Secretary of State said that wage restraint was the main cause of the deceleration in the price index? Does the hon. Gentleman agree with the other side of the coin—that the acceleration in prices was due to wage increases?

Mr. Alan Williams

My right hon. Friend did not say that. In answer to one of my colleagues she said that it was a factor and, as the level of wage settlements fell, this was being reflected in the rate of inflation.