Inflation (Hansard, 16 June 1975)

§ 2. Mr. Adley
asked the Secretary of State for Prices and Consumer Protection by how much the retail price index has risen since 28th February 1974.

§ 14. Mr. Giles Shaw
asked the Secretary of State for Prices and Consumer Protection what is the current rate of inflation based upon a grossing-up to an annual rate of the last three months' increase in the retail price index, and calculate 929 on the same basis as the three month figure of 8.4 per cent. quoted by the Chancellor of the Exchequer as being the grossed-up annual rate of inflation for August 1974.

§ 17. Sir George Young
asked the Secretary of State for Prices and Consumer Protection what is the latest rate of price inflation expressed at an annual rate.

§ The Secretary of State for Prices and Consumer Protection (Mrs. Shirley Williams)
The retail price index has risen 25 per cent. over the last 12 months to May 1975 and 32.3 per cent. since February 1974. The change over the last three months, grossed-up to an annual rate, is 53.1 per cent. but the figures are distorted by the measures which the Government have had to take for the reasons my right hon. Friend gave in his Budget Statement.

§ Mr. Adley
No matter how much the right hon. Lady may talk about the figures being distorted, is she not aware that the disgraceful figure she has just announced is her personal contribution to 16 wasted months of Socialism? Is she not ashamed of being a member of a Government who are bringing this country to such a state that people going abroad on package holidays now purchase their currency a week in advance to avoid the effect of inflation? As the right hon. Lady is a well-advertised moderate in the present Government, will she now begin to disown the wild Socialist policies that are bringing the country to its knees?

§ Mrs. Shirley Williams
The hon. Gentleman will know that over the last year-and-a-bit the Government have cut retail profits by 10 per cent., have announced a three-months' gap between price rises, introduced subsidies on basic foods, introduced investment relief into the Price Code, introduced maximum prices for subsidised food, and extended unit pricing. On every one of those measures the Opposition have attacked us, opposed us or, at best, grudgingly agreed with us. When the Opposition realise that indignation is no substitute for a positive policy I shall listen to them, but not before.

§ Mr. Heffer
I entirely accept the point which my right hon. Friend has just 930 made, but will she also take into consideration the fact that the time has come for very drastic measures to be taken? Will she consider the whole question of introducing a price freeze on certain basic commodities? I accept that this is very difficult. Nevertheless, will she now consider the proposals by, for example, ASTMS and other organisations, to have a price freeze on basic food commodities?

§ Mrs. Shirley Williams
I am interested in any such proposals, including those by trade union leaders. However, it must also be accepted that there must be a general restraint on incomes if a price freeze is to serve any purpose.

§ Mr. Giles Shaw
Does the right hon. Lady not accept that we have moved a considerable way from the Chancellor's claim of 8.4 per cent. inflation last August, doubtless based upon a formula for the full-hearted content of the British people? Does she not further agree that over half of last month's staggering price rise was due to the action which the Chancellor took and action which probably the Secretary of State for Employment failed to take in relation to the social contract? When will the Government take some action through the Department of Prices and Consumer Protection to prevent this appalling rate of inflation continuing?

§ Mrs. Shirley Williams
I have already indicated to the hon. Gentleman—and he knows it very well—that one of the main reasons for our inflation is not that we are a high-wage country but that we are a low-productivity country. The reasons for that go far back into our recent history. What is essential is to take, over the next couple of years, the investment measures that will enable us to become a high-productivity country. For the present, we require from all sections of the community, including the Opposition, acceptance of restraint for a couple of years, which will enable this process to begin.

§ Mr. Dempsey
Is my right hon. Friend aware that the measures she has taken are welcomed as an effort to control the rising cost of living? But does she realise that many of the price regulations are not being enforced? I recognise that it is impossible to enforce them from trader 931 to trader, but is it not possible to have random checks to ensure that they are observed?

§ Mrs. Shirley Williams
I thank my hon. Friend for what he said. Only recently I instituted a series of special inquiries into individual prices which go beyond the general control of the Price Code. The first reports from those special inquiries are expected very shortly.

§ Sir George Young
is the right hon. Lady aware that she recently attracted widespread public support for her announcement in the referendum campaign that she would rather resign from public life than remain committed to an administration pursuing policies in which she did not believe? Will she apply the same high standards and resign from public life if her colleagues in the Cabinet do not introduce measures at once to bring down the disastrous rate of inflation?

§ Mrs. Shirley Williams
Like so many of his colleagues, the hon. Gentleman always talks in general terms and never in specific ones. The whole difficulty about the Opposition's approach is that they try to replace policy with expressions of indignation and never face up to the problems of making a voluntary incomes policy work.

§ Mr. James Lamond
To take a specific example, has my right hon. Friend had any information from the suppliers of petrol that they will now be able to reduce their prices because of the reopening of the Suez Canal, the closing of which caused them to increase prices some years ago?

§ Mrs. Shirley Williams
We shall certainly be closely watching the effects on oil prices of the reopening of the Suez Canal. I also assure my hon. Friend that the Price Commission, with our encouragement, is chasing up all falls in raw material prices to make sure that they are carried through in the final prices.

§ Mrs. Sally Oppenheim
As the right hon. Lady has presided over the fastest rise in prices this century—rises which were largely avoidable and which will bring serious economic and social consequences in their wake—does she agree that in the circumstances it would be honourable to resign? Instead of giving lectures and quoting statistics, will she turn 932 her attention to the consequences, in human terms, of the devastating rate of inflation—for which her Government are responsible—on the people who have not gained the spoils of the big battalions to protect them against the effects of inflation—people who will suffer a sharp cut in living standards, whose jobs are in danger—[HON. MEMBERS: "Speech."] I can understand that Labour Members do not want to hear this. Does not the right hon. Lady agree that her Government have created the most unfair society in this country since the war?

§ Mrs. Shirley Williams
That was, perhaps, a speech rather than a supplementary question. I do not think that calling for resignations across the Floor of the House is a substitute for thinking about ways to solve the nation's problems. The hon. Lady knows perfectly well that her Government's efforts to deal with inflation led straight to the three-day working week. We are trying to find a better answer, based on a voluntary policy. The Opposition would do better to support us and the social contract rather than perpetually undermine it.

§ Mr. Adley
On a point of order, Mr. Speaker. In view of the unsatisfactory nature of the Secretary of State's answer, and to give her an opportunity for her to hear our proposals, I wish to give notice that I shall seek to raise the matter on the Adjournment.

§ 13. Mr. Neubert
asked the Secretary of State for Prices and Consumer Protection what is the latest annual rate of inflation according to the Price Commission index.

§ Mrs. Shirley Williams
In the 12 months to February 1975 the Price Commission's index rose by 19.6 per cent. This index was published in the most recent quarterly report.

§ Mr. Neubert
As the rate of inflation has more than doubled in the last three months, and as the Price Commission stated that any increases in prices have been due almost exclusively to increases in wages, is it not clear that a policy that seeks the control of prices, except the most important price—the price of labour—may well be in the interests of the British Labour Party but not in the 933 interests of the British people as a whole, and must be a highly damaging sham?

§ Mrs. Shirley Williams
The hon. Gentleman owes it to the country not to make remarks that are quite as wild as that. It is not the case that the rate of inflation has doubled in the last three months. The figure that I gave was 19.6 per cent. on a 12-monthly basis; the figure today is 25 per cent. That is not a doubling by any mathematics. I have made it clear on many occasions, as have my colleagues in the Government, that we are concerned about the level of labour costs. Incidentally, they are not just wage costs, for labour costs generally go far beyond that. The hon. Member simply cannot wave aside the problems of establishing either a voluntary or a statutory incomes policy. We have had long experience of the latter.

§ Mr. Tomlinson
Does my right hon. Friend not agree that it is somewhat over-simplistic to argue that there should be a total freeze on prices at the same time as it is argued that there should be greater investment in industry? Do not many people find motivation for investment in a mixed economy in the profitability on their return? While profits need to be controlled, to argue that there should be no return on investment is likely to have major implications in terms of jobs.

§ Mrs. Shirley Williams
My hon. Friend is leaping to exactly the opposite conclusion to that to which the Opposition leapt. We have neither said nor denied that there would be a price freeze; we have simply said that all options have to be open at present. It would be as mistaken for my hon. Friend to leap to one conclusion as it is for the hon. Member for Oswestry (Mr. Biffen) to leap to the opposite conclusion. The straight truth of the matter is that these issues are under discussion at present, as the House well knows. The investment relief was introduced by the Government, for the first time, specifically because we recognised the importance of there being the highest possible level of investment in the public and private sectors.

§ Sir John Hall
In view of the Chancellor's stated intention to halve the rate of inflation over the next 12 months, will the right hon. Lady say what base figure the Chancellor is using?

§ Mrs. Shirley Williams
I would like the hon. Gentleman to ask my right hon. Friend that question because I am not quite sure of the exact phrase to which the hon. Gentleman is referring.

§ Mr. Heffer
Is it not absolutely wrong to suggest that the basic cause of inflation is wage increases? While wage increases undoubtedly have a marginal effect on inflation, is it not the case that there are other factors of much greater importance? Is it not clear that in Chile, where a totally free enterprise system has been introduced, inflation has increased by 150 per cent.? Does my right hon. Friend not agree that it is not true to suggest that by lifting all price restrictions inflation is automatically held back? On the contrary, is not private enterprise the biggest ingredient in the creation of inflation?

§ Mrs. Shirley Williams
My hon. Friend must accept, as I must, that in recent months labour costs have been the main force behind inflation.

§ Mr. Heffer
I do not accept that.

§ Mrs. Shirley Williams
I repeat that these are labour costs including the costs of the professions and the self-employed. It does not mean costs which fall only to trade unions. My hon. Friend and I would agree that we live in a relatively low-wage economy and that it is understandable that people try to force up their wages in this situation. The centre of our problems lies in the fact that we have to increase productivity to the extent that we can pay decent wages. These are not problems created over the last year-and-a-bit by the Government.

§ 21. Mr. Tim Renton
asked the Secretary of State for Prices and Consumer Protection what plans she has to mitigate the effects of inflation on food prices for those on below average incomes.

Mr. Alan Williams
The food subsidy programme, together with the operation of the Price Code and other counter-inflation measures, will continue to provide substantial benefit to those on below-average incomes.

§ Mr. Renton
Is the hon. Gentleman aware that, due to the failure of his Government to take action sooner, we now have the same inflation rate as Brazil, and that for it to be cured everyone in this 935 country will have to take a cut in their standard of living. During this process, what new measures has the hon. Gentleman in mind to protect the old and the weak, who will necessarily be most at risk?

Mr. Alan Williams
As the hon. Gentleman will appreciate, the Chancellor of the Exchequer is undertaking consultations with both sides of industry on the future programme. In the meantime, the protection which we give to the lower income groups remains.

§ Mr. Ronald Atkins
In view of the scaling down of food subsidies, will my hon. Friend resist the introduction of VAT on food as practised in the Common Market?

§ Mr. Man Williams
I have no knowledge of any such intention, but my hon. Friend will fully appreciate that that is a question for the Chancellor of the Exchequer, and that it would be utterly wrong for me to try to answer it.