HC Deb 17 June 1976 vol 913 cc727-9
15. Mr. Lawson

asked the Chancellor of the Exchequer if he will make a further statement concerning his Budget proposals in the light of the special TUC conference of 16th June.

Mr. Healey

I refer the hon. Member to the Answer that I gave earlier today to the hon. Members for Bolsover (Mr. Skinner), Hazel Grove (Mr. Arnold) and Glasgow, Cathcart (Mr. Taylor).

Mr. Lawson

Will the Chancellor tell the House whether it is the case that so far from the members of the big trade unions, such as those of Mr. David Basnett and Mr. Jack Jones, having made big sacrifices, the sacrifices that the nation must make in the way of falling living standards bear particularly heavily on higher-paid workers, such as those represented by the unions of Mr. Clive Jenkins and Mr. John Lyons, and above all the bear on middle management, whose lot is made worse by the Budget proposals.

Mr. Healey

The whole House will be as fascinated as I by the prospect of an alliance between the hon. Member and Mr. Clive Jenkins. I hope that this axis is as durable as the earlier one. Of course, everyone has sacrifices imposed upon him when inflation is at the rate that we have seen in the last few years. What is impressive, however—I hope that the House is as impressed by it as opinion abroad and the overwhelming mass of the British people have been—is that members of the TUC have voluntarily accepted further sacrifices in order to cure inflation, and that the sacrifices they are making will benefit millions of people who are not members of trade unions.

Mr. Canavan

In view of the TUC's agreement yesterday on the 4½ per cent. wages policy, and in view of the Government's commitment to bring inflation down to just under 10 per cent. at some time early next year, does it not mean that even when we reach that target prices will still be rising twice as fast as wages? Does that not mean that we should have stricter price controls, especially on basic essentials like food, fuel and housing?

Mr. Healey

It is of course essential that prices should be strictly controlled, but it is also essential that price control should not operate in such a way as to risk employment or damage investment. This matter is now being considered by the Government in their discussions about possible modifications to the Price Code.

Mr. Grimond

Does the right hon. Gentleman agree that, difficult as it may be, the gap between earnings at the bottom of the scale and those at the top will have to be narrowed, and that we should now all bend our minds as to how that will be done with reasonable fairness?

Mr. Healey

The right hon. Gentleman must recognise that there has been a remarkable narrowing of the gap in the past 20 years, which has proceeded very much faster in recent years. At the risk of associating myself with persons with whom I do not normally associate, I must draw his attention to the remarks of the hon. Member for Blaby (Mr. Lawson)—namely, that the compression of differentials that has resulted from this has put great strains on pay policy, and has done some damage to the economy. I hope that the right hon. Gentleman will accept that.

Mr. Watkinson

Does my right hon. Friend accept that although the agreement reached yesterday was most welcome it is only part of the inflation batttle, and that one of the biggest risks now facing the Government is a monetary explosion? Will my right hon. Friend ensure that we do not undertake the process of printing money next year only to fuel inflation?

Mr. Healey

I have made it clear repeatedly that I do not regard the pay agreement as the answer to all our economic problems. However, I believe—I wish I could feel that the whole House agreed with me—that without such an agreement the solution of our other problems would be totally impossible. As for a monetary explosion, I hope that my hon. Friend will take note of the fact that in the past two years I have'succeeded in keeping the growth of the money supply under strict control. The fact that it grew by only 8 per cent. last year, compared with 28 per cent. in the last year of the previous Government and 23 per cent. in 1972, is a matter for congratulation, and a reason for confidence that I will not permit the monetary explosion of which my hon. Friend spoke.

Mr. Nott

Is the right hon. Gentleman aware that to prevent that explosion the Bank for International Settlements and the Bank of England have implied that the Chancellor will have either to reduce public expenditure this year or raise taxation? As his party will not allow him to reduce public expenditure, does he agree that a rise in VAT and indirect taxation before the end of the year is now almost inevitable? Will that not be contrary to the spirit of the whole of the TUC conference yesterday and the deal that the Chancellor has worked out with the TUC? Is it not now inevitable that there will be a rise in taxation before the end of the year?

Mr. Healey

First, I do not agree with the hon. Gentleman. I ask him to adopt the humility urged on the House by his right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), and to recognise that as a member of the Treasury when the money supply was totally out of control and inflation was rocketing to its present heights, this might be a wonderful opportunity for him to keep his mouth shut.