Price Increases (Hansard, 15 November 1976)

§ 13. Mr. MacGregor
asked the Secretary of State for Prices and Consumer Protection when he now expects the annual rate of increase in the Retail Price Index to fall below 10 per cent.

§ Mr. Hattersley
Due to a number of factors, including the depreciation of sterling and the drought, the current level of inflation is likely to persist for the next few months. I am not prepared to forecast beyond that.

§ Mr. MacGregor
With the effects of the decline in sterling still to come through, higher mortgage rates coming up, much higher rates anticipated, higher fares and probably increased VAT, is it not clear that there is every likelihood that the rate of price increases in the next 12 months will be higher than in the past 12 months? Will the Secretary of State confirm that that will mean that 916 we shall continue to be in a worse posiiton than nearly every other Western country, by a long way, and will he now admit that the social contract, whose policies have produced this situation, is a total failure?

§ Mr. Hattersley
No. I share the view of the Price Commission, which, in its most recent report—I am sure that I paraphrase it crudely—suggested that the level of retail prices would rise by about the same figure for some months, that it would then be reduced, and that the reduction would largely be the result of the second stage of the wages policy, which is inherent in the social contract. I have no doubt that the success that we have achieved to date and that we can anticipate is the direct result of the social contract. Those who are prepared to shout about it destroy the social contract at the country's peril, not their own.

§ Mrs. Sally Oppenheim
Is the Secretary of State aware that his reluctance and that of his right hon. Friend the Chancellor to make forward forecasts is understandable in the circumstances, because they have not got one right yet? Will he tell the House, with the benefit of hindsight, what the rate of inflation would have been over the past two and a half years if the social contract had been observed for the first 18 months, if the Government had not overspent and overborrowed, and if the pound had not depreciated by 25 per cent. as a result? Will he also tell us how much of the hardship and fall in living standards which are now inevitable could have been avoided?

§ Mr. Hattersley
One of the main problems of the Labour Party losing by-elections is that Opposition Members get so excited that they never ask sensible questions—

§ Mrs. Oppenheim
Answer.

§ Mr. Hattersley
—but let me answer the hon. Lady. As she knows, it is impossible to hypothesise in that way. She must understand that the problems with which we had to wrestle included major items that we inherited from the previous Administration. I should like to give one example from the list offered to the House by my hon. Friend the Under-Secretary of State. One of our problems 917 over the public sector borrowing requirement has been that the Conservative Government refused to allow publicly-owned industries to move towards a situation in which they were self-supporting, but supported them out of deficits and therefore increased the borrowing requirement. It is that sort of problem with which we have wrestled and are now overcoming.