Inflation

HC Deb 13 May 1976 vol 911 cc651-4

4. Mr. Michael McNair-Wilson

asked the Chancellor of the Exchequer what is the current annual rate of inflation.

The Chancellor of the Exchequer (Mr. Denis Healey)

The Retail Price Index rose by 21.2 per cent. over the 12 months to March, the seventh successive month in which the year-on-year rate of inflation has fallen. The increase of 0.5 per cent. between February and March is the lowest monthly rise since August 1974. The figures for April will not be available until tomorrow, but I am confident that they will show that the year-on-year rate of inflation is continuing to decline.

Mr. McNair-Wilson

What figure for inflation was used as the basis of the Chancellor's talks with the TUC? Was it sufficiently flexible to allow him to use the same figure that he had in his Budget estimation, despite the fact that wage rises in 1976–77 have been allowed to increase from 3 per cent., as then envisaged, to 4½ per cent?

Mr. Healey

The hon. Gentleman will know that the result of the agreement between the Government and the TUC will be to reduce the rate of inflation by half once again during 1977. This is an agreement that has been welcomed universally throughout the world. Indeed, so far as I know, the only area from which it has received a sour, sullen and equivocal reception is the Opposition Front Bench.

As to how far the agreement with the TUC affects the sums that I announced in my Budget Statement, we were assuming in the Budget Statement a rate of wage increase next year of between 5 per cent. and 10 per cent. As the hon. Gentleman will now know, it is likely to be lower, at 4½ per cent., and the rate of wage inflation in Britain during the next wage round will be the lowest in the whole of the industrial world. That is why our achievement has been so widely welcomed, not only in this country but in Germany, the United States and throughout the industrial world.

Mr. Cryer

Will my right hon. Friend reiterate his view that the 4½ per cent. agreement with the TUC is designed to combat inflation? Will he also tell the House how the 25 per cent. dividend allowance to ICI will convince the TUC of the validity of its sacrifice? Will he say, for example, whether he has a copper-bottomed guarantee from ICI that the money raised in its rights issue resulting from the dividend allowance will be used and invested in this country, and not siphoned abroad by this large multinational company?

Mr. Healey

I am grateful for the support that I have received from my hon. Friend. It comes as a particular pleasure an hour or two after the National Executive of the National Union of Mineworkers has voted for the new policy by a substantial majority. I hope that we shall have congratulations from the sour Front Bench opposite on this as well. The Opposition are concealing their enthusiasm quite successfully.

The rights issue by ICI yesterday is further proof that there is no obstacle whatever to industry's raising new money if it wishes to do so.

Mr. David Howell

Is the Chancellor of the Exchequer aware that when he talks about economic miracles we cannot help recalling the economic miracle he achieved in October 1974 of reducing inflation to 8.4 per cent.? This is bound to be taken into account when assessing his latest rather extravagant claims.

Has the Chancellor of the Exchequer also noticed Mr. Len Murray calling today for even tighter price control, bearing in mind that that means more loss of jobs and lower investment? Will he say what instructions he has received from the TUC on that matter?

Mr. Healey

The House and the country will have noticed the grumpy and trivial way in which the hon. Gentleman responds to a great national achievement. [Interruption]. As hon. Gentlemen are addressing me from recumbent positions I am unable to hear what is said. No doubt they will seek to catch your eye, Mr. Speaker, if they wish to make a substantial contribution.

As I have said, the rate of inflation has been more than halved in the last year and it will be further halved in the coming year. I think that the British people would find it not amiss if Her Majesty's loyal Opposition were prepared to welcome this achievement, because this is an achievement by the British people as a whole and not just by the Labour Government.

16. Mr. Adley

asked the Chancellor of the Exchequer what further consultations he intends to have with the TUC about the level of wage increases necessary to bring down the rate of inflation.

Mr. Healey

I refer the hon. Member to the statement I made to the House on 5th May.

Mr. Adley

Is the Chancellor of the Exchequer satisfied with the present ad hoc negotiating arrangements with the TUC and others, or does he feel that it would be in the long-term national interest for statutory machinery, such as an annual wage-salary budget, to be set up among the Government, the TUC and the CBI?

Mr. Healey

My right hon. Friends and I have repeatedly made it clear that we do not believe that any statutory machinery is suitable for the regulation of wages. We believe that it is necessary for the Government, of whichever party, to discuss these problems with the leaders of the trade union movement and of the CBI to reach an agreement which is consonant with the nation's interest. I think that the hon. Gentleman will agree that it is a great deal easier for us to reach an achievement such as we reached last week—an achievement which has been universally welcomed both outside and inside this country, apart from the Opposition Front Bench—because we treat trade union representatives in these discussions as representative of their members. We do not take the view expressed by the Shadow Chancellor of the Exchequer two days ago in this House that the agreement represents an onslaught upon their standard of living and freedom generated and forced down the throats —of the British people— by ageing doctrinaire, prejudiced, Socialist trade union leaders."—[Official Report, 11th May 1976; Vol. 911, c. 375.] It would be helpful if the hon. Gentleman asked his right hon. Friend how he reconciled those disgraceful remarks with the very different words he read out in a speech yesterday.

Mr. Lawson

Is the Chancellor of the Exchequer too smug to be aware that at the launching of the £6 limit at a Press conference on 11th July last year he gave a firm assurance that the next round of the pay policy would allow a widening of differentials? Why has he gone back on his word?

Mr. Healey

First, I regard the hon. Gentleman as perhaps the leading expert in this House on smugness. But I think that he will recognise that, whereas last year we had a flat £6 limit for all salaries up to £8,500, the new agreement, which has been universally welcomed, except by the Opposition Front Bench, provides for a spread between £ 2 and £4, and the £4 is available at all levels of income.