§ Q2. Mr. Mike Thomasasked the Prime Minister whether he will place in the Library a copy of his public speech on counter-inflation policies to Post Office workers in Bournemouth on 23rd May.
§ The Prime MinisterI did so on 25th May, Sir.
§ Mr. ThomasIf he were to make that speech today, would my right hon. Friend feel able to agree with the right hon. Member for Lowestoft (Mr. Prior) that the trade unions have acted with patriotism and responsibility in the matter of the present pay policy, and would he feel able to disagree with the right hon. Gentleman in his prognostication that the pay policy is likely to collapse and fail? Does my right hon. Friend agree that it is unpatriotic and irresponsible to make such statements? Does he also agree that it shows about the same level of political judgment as the Leader of the Opposition has shown in the past three weeks?
§ The Prime MinisterI do not agree that the pay policy of the TUC is likely to fail this year. In my view the right hon. Gentleman's judgment will prove to be wrong. That is because the policy has secured not the force of law but something that is more important, namely, the voluntary consent of free men freely voting through their own organisations. I believe that it will stand up.
The right hon. Gentleman's article, which I have before me, points out some 306 of the difficulties that will ensue. He is right in some of those matters, and he is doing no more than repeating some of the statements that have already been made by my right hon. Friend the Chancellor of the Exchequer. As I have pointed out, the longer a policy of this sort goes on the more the difficulties that follow, but that is no reason for indicating that a policy which, as I believe, will receive overwhelming support tomorrow is likely to fail in the period up to August 1977.
§ Mr. AdleyIs the Prime Minister aware that his decision to stay in my constituency when he made his speech was very much welcomed, and that he always will be welcome in my constituency? But as the Government's policies are leading to a continuing depreciation in sterling, which is itself having an effect on the Government's fight against inflation, is the right hon. Gentleman willing to maintain the point that he made in his speech about the Government's confidence in getting inflation down to a level of 6 per cent., 7 per cent. or 8 per cent. by the end of 1977?
§ The Prime MinisterYes, I see no reason to depart from that forecast. The agreement that the trade unions are recommending to their members tomorrow will take effect from August and will run until August 1977. As many wage negotiations are not concluded until the spring, the impact will be felt right through until the spring of 1978. That, coupled with other fiscal and monetary policies of the Government, leads me to the conclusion that if we carry through our policies rigorously and in a determined way we shall be able to reduce inflation very substantially.
§ Mr. SedgemoreAssuming that the rumours are true and that we are about to witness the love story of the century, through the reunion of the harlot and the sailor, will the Prime Minister care to ask each of them whether they intend to carry out their counter-inflation policy through monetarist measures, through neo-Keynesian economic measures or—
§ Mr. SpeakerOrder. I think that is enough for the Prime Minister.
§ Mr. GowOn a point of order, Mr. Speaker. Should not the hon. Member 307 for Luton, West (Mr. Sedgemore) withdraw that remark?
§ Mr. SpeakerWill the hon. Member wait until after Question Time? I shall deal with the matter then. There are only five minutes left for Prime Minister's Questions. I am afraid that I must tell the House—I am not trying to dodge the issue—that I heard only the phrase "the harlot and the sailor". I do not think it was applied to anyone in particular. I am not trying to avoid the issue. I did not hear anything else.
§ The Prime MinisterI do not believe that we have yet had spelt out to us in any convincing way the policy that the Opposition would follow in relation to fiscal or monetary policies. Until that happens the Government's policy is the only one that stands in front of the nation.
§ Mrs. ThatcherIf I may ask the Prime Minister a serious question, now that the truth behind the latest loan is steadily filtering through, does he intend within the next six months to take any steps to reduce the Budget deficit—action that the Bank for International Settlements says is imperative if our economy is properly to recover?
§ The Prime MinisterI assume that the right hon. Lady used the word "loan" through inadvertence. It is not a loan; it is a standby credit, which may be used wholly, in part, or not at all by the end of three months or six months. As regards what the right hon. Lady had to say about Government expenditure for 1977–78, as she will know from her previous experience, that is a matter that is reviewed by Governments through the public expenditure survey exercise. That exercise will be carried out by the Chancellor in an orderly way during the coming months, and our proposals for next year's expenditure will be placed before the House in due course.
§ Mrs. ThatcherIs it the position that the Prime Minister has not excluded that possibility, and that he may take the view that in addition to pay restraint some movement on Budget restraint is also necessary?
§ The Prime MinisterI have never ruled that out, any more than the Chancellor has done. As my right hon. Friend 308 has said—I think he was the first to say it—it rather depends on the rate at which private investment scoops into the available pool of savings. We do not want to create unemployment at this moment by cutting public expenditure, and that would be the impact of it. However, as private investment and manufacturing investment take up the strain, clearly the Chancellor will need to review the position. That will be done in an orderly way during the months that lie ahead.