HC Deb 15 July 1976 vol 915 cc883-5
5. Mr. Skinner

asked the Chancellor of the Exchequer whether he is satisfied with the current rate of inflation; and if he will make a statement.

Mr. Healey

I refer my hon. Friend to the reply given to his Question on 8th July.

Mr. Skinner

I think my right hon. Friend said then that he was not terribly satisfied and that he hoped for something better—roughly speaking, that is. Does he not agree that his optimistic forecasts on that occasion have gone somewhat astray and that it is almost bordering on madness to allow an extra £1,000 million of price relaxation when the Treasury is forecasting that profits will be up by about 30 per cent. compared with last year? Does my right hon. Friend agree with the Henley forecast in the past few days that inflation will still be over 10 per cent. by the end of 1977 and that wages will have little to do with it?

Mr. Healey

I am disturbed by the evidence that my hon. Friend's memory has become defective. My answer on 8th July bore no relation to what he appeared to remember of it, as he will discover if he refreshes his memory.

The rate of inflation has been falling steadily. On the last monthly figures, it was only 50 per cent. above the OECD average [Interruption.]—we still have some way to go—whereas a year ago it was 200 per cent. above the OECD average. I do not think that any hon. Member, including my hon. Friend, would deny that this astonishing improvement in our inflationary prospects is largely due to the common sense of the trade union movement—reinforced by recent decisions of the NUR and UCATT, which I hope my hon. Friend welcomes as much as I do—giving a 20-to-1 majority at the recent TUC congress for the 4½ per cent. pay limit which we negotiated some time ago. As regards the Henley forecast, no, I do not agree with it, nor does anybody who has attempted to forecast inflation.

Mr. Alexander Fletcher

Will the right hon. Gentleman in his complacency acknowledge, having inherited a rate of inflation of 9 per cent. in 1974 and having by his policies allowed that almost to treble, that bonfires should be lit throughout Britain if he ever succeeds in getting the rate back to a single figure?

Mr. Healey

I hope that the hon. Gentleman will join me in lighting the bonfire. I can think of some suitable fodder for it. The hon. Gentleman referred to my complacency. Believe me, the only time when I am ever tempted into that vice is when I contemplate the Opposition Front Bench.

Mr. Heffer

Does my right hon. Friend accept that part of the pay deal argument was that unemployment should be kept down? Is it true that extra unemployment of 70,000 as a result of proposed cuts was actually discussed with the TUC yesterday morning? If that is true, how does my right hon. Friend square it with previous statements?

Mr. Healey

In discussions with the TUC last year and this year I have made it clear that the pay policies which I have put to it, which it has accepted, would ensure that unemployment would be a good deal lower than would otherwise be the case. That point has been made many times by Mr. Hugh Scanlon on television and elsewhere. I must remind my hon. Friend that a year ago many of the Government's critics were predicting that in June of this year there would be 2 million unemployed. As you know, Mr. Speaker, it is barely above 1¼ million. It is true that public expenditure cuts in 1977–78 mean that the fall in unemployment will be less than it would otherwise have been, but unemployment is likely to fall in the next few months. Indeed, it will have been falling for at least 18 months by the time the full employment effect of any public expenditure cuts is felt.

Sir J. Langford-Holt

To return to the rate of inflation from unemployment, will the right hon. Gentleman tell us when the rate of inflation last stood at 8.4 per cent.?

Mr. Healey

Yes. On the three-monthly figure it was 8.4 per cent. in October 1974, as Opposition Members often remind me.