HC Deb 27 January 1976 vol 904 cc239-42
Q1. Mr. George Gardiner

asked the Prime Minister whether the statements by the Chancellor of the Exchequer on economic policy in his London Weekend Television interview on 4th January represent Government policy.

The Prime Minister (Mr. Harold Wilson)

Yes, Sir.

Mr. Gardiner

I ask the Prime Minister specifically whether he agrees with two statements made by the Chancellor of the Exchequer in the course of that interview. First, his right hon. Friend said that there could be no question of replacing the present £6 pay limit with another flat rate and that there must be more flexibility so as to allow for differentials. Secondly, he said that there was a special case for giving some tax relief to middle income earners. The right hon. Gentleman confessed that he had given them quite a caning. Does the right hon. Gentleman agree with those two statements?

The Prime Minister

My right hon. Friend did not use quite the expression the hon. Gentleman has mentioned. He indicated the case for more flexibility, but this issue has not yet been decided, as my right hon. Friend made clear at the time. My right hon. Friend was speaking on behalf of Her Majesty's Government in that second statement.

Mr. Skinner

Is my right hon. Friend aware that since the Chancellor's broadcast, when he talked about giving some element of tax relief to the middle class—namely, those earning between £4,000 and £8,000 per annum—the Secretary of State for the Home Department has said—quite alarmingly, most people in the PLP would think—that when public expenditure as a proportion of national income reaches 60 per cent. and beyond, the result is that a pluralist democracy is in danger?

Taking into account the two restrictions mentioned by the Chancellor and the Home Secretary and today's ministerial replies about pensions, how are we to observe what my right hon. Friends have said and at the same time get better pensions, more hospitals and more housing? Does my right hon. Friend agree that he should get these people together?

The Prime Minister

My right hon. Friends are together. The Question on the Order Paper relates to a broadcast by my right hon. Friend the Chancellor of the Exchequer. If my hon. Friend wishes to table a Question about the speech of my right hon. Friend the Secretary of State for the Home Department, I shall be delighted to answer it.

Mr. Duffy

Is my right hon. Friend aware of the conclusion drawn in the latest report of the Price Commission—that inflation is now slowing down, but that it is still relatively too high for pressure to be significantly eased on the exchange rate and, therefore, on import costs, and that much the greater part of the improvement is attributed to the almost universal observance of the £6 voluntary limit on pay increases?

The Prime Minister

Yes, the current report of the Price Commission is an extremely important document and marks a very important stage in the fight against inflation. I am sure that its conclusions will be as welcome to Opposition Members as it is clearly welcome to my hon. Friend and myself. He will be aware of course, that the Commission's own index and other published indices show a very significant fall in the rate of inflation.

Q3. Mr. Peter Morrison

asked the Prime Minister whether the television interview given by the Chancellor of the Exchequer on 4th January on the economy represents Government policy.

The Prime Minister

I refer the hon. Member to the reply which I gave earlier today to the hon. Member for Reigate (Mr. Gardiner).

Mr. Morrison

Will the Prime Minister give his own views about the restoration of differentials? Will he support the attempts of the Chancellor of the Exchequer to resist the pressure from his left wing to reflate the economy?

The Prime Minister

The subject of differentials and the next stage of the anti-inflation policy will have to be discussed with all concerned. At this stage it is impossible to forecast the right answer. There must be discussions. During the greater part of last summer I was badgered by the Opposition to do something, presumably statutory. We have achieved the right answer, it is working, and the hon. Gentleman should wait for the progress of further consultations.

Mr. Newens

Is it not hypocritical for Opposition Members to press for cuts in public expenditure and at the same time to press for increased expenditure on armaments in the spirit of the cold war?

The Prime Minister

The speech made last week, which has been the subject of some comment this afternoon, contained a complaint about a cut of £4.8 billion in the defence review last year. Any party that claims to want to cut Government expenditure overall must start by replacing that £4.8 billion as well as dealing with Maplin, the Channel Tunnel and all its other commitments.

On the subject of public expenditure, I was interested to note the forthcoming and frank statement by the right hon. and learned Member for Surrey, East (Sir G. Howe), who advocated cuts in expenditure this year rather than three years ahead. He admitted that this would cause additional unemployment this year. The House should know whether the Leader of the Opposition supports that view.