Cost of Living

HC Deb 11 October 1976 vol 917 cc13-6

13. Mr. Jessel

asked the Secretary of State for Prices and Consumer Protection by what percentage the cost of living has increased since February 1974 to the latest available date.

Mr. Hattersley

By 55.9 per cent.

Mr. Jessel

Will the Government apologise to the British people for that appalling performance?

Mr. Hattersley

I think the British people understand that the Government have taken decisions that are necessary in the circumstances. We have taken them in the light not only of economic necessities but of the obligations of compassion and social understanding on which we were elected. I hope that we shall go on doing exactly that.

Mr. Tebbit

If that is compassion, God save us from cruelty.

Mr. Cormack

What is the difference between the figure the Minister has just announced and the figure of 8.4 per cent.?

Mr. Hattersley

My arithmetic is not sufficiently good other than to say that it is more than 40. I hope the hon. Gentleman is not falling into the common, if not vulgar, error of assuming that two periods of inflation can be compared. They cannot.

Mr. Skinner

Does my right hon. Friend recall that many Labour Members were cajoled into supporting the Government's policy of keeping down the rate of inflation and the cost of living on the basis of backing the pay policy, with its subsequent effect in reducing purchasing power? Why is it that on the basis of those concessions trade unionists must now suffer an enormous increase in the cost of living? What is the Government's strategy to get down the cost of living in future?

Mr. Hattersley

The trade unions, their members and their wives and other consumers have to face the present situation because there are some immutable economic laws that neither trade unions nor the Government can defy. I believe that in responding to those immutable economic laws the partnership of the trade unions and the Government is working. The trade unions and the Government have to realise, as in general I believe they do, that this is a long haul. Although we have begun the process, there will yet be some period before we can claim the success that we hope to achieve.

Mrs. Sally Oppenheim

Does not the right hon. Gentleman agree that during the latter part of the period about which he is answering questions the so-called Price Check Scheme was in operation, and that within the four months of the ending of the scheme the prices of most of the main items in the scheme have risen by over 10 per cent., as I predicted? Therefore, will he confirm that the scheme was a short-term confidence trick?

Mr. Hattersley

I confess frankly to the hon. Lady that when I took on my new job I had some scepticism about that scheme, but, having examined the scheme during the first days in my new office, I discovered that there had been real tangible and substantial price benefits. If the hon. Lady wishes to table a precise Question on the matter, I shall endeavour to give her a precise answer.

Mr. William Hamilton

Has my right hon. Friend made any calculation about the increase in the cost of living that would result from the abolition of council house subsidies and free school meals, as advocated at Brighton last week?

Mr. Hattersley

We have not yet made an arithmetical calculation because it does not seem to us that the circumstances will come about which would allow such policies to be put into operation. Two things are clear. The first is that there would be an enormous increase in the cost of living. The second is that such policies would destroy the social contract, on which the success of the last two years has been built and without which I believe this country.—[HON. MEMBERS: "Success?"] Right hon. and hon. Members on the Conservative Benches must decide whether they believe that a cut in the inflation rate of 50 per cent. is a substantial achievement. If it is, it has come about because of the social contract. The policies to which my hon. Friend has referred would result in the social contract being abandoned.

26. Mr. George Rodgers

asked the Secretary of State for Prices and Consumer Protection what will be the overall impact on the cost of living as a consequence of the Chancellor's statement on public spending restrictions, the relaxation of the Price Code and the common agricultural policy during the years 1977 and 1978.

Mr. Hattersley

It is not possible to make meaningful forecasts over such a long period.

Mr. Rodgers

Does my right hon. Friend agree that a policy that restricts wages and salaries in isolation is not adequate and is certainly unfair? Does he agree that greater emphasis should be placed on the control and restriction of profits and prices if the social contract is to survive?

Mr. Hattersley

No one could support a policy which placed the burden of economic recovery solely on wage earners by limiting their wages. As well as having an effective and socially just wages policy, we must ensure that we have a prices and profits policy that meets our social requirements. That does not mean an all-out attack on profits no matter what their use may be. It means an attempt to ensure that when profits are made they are properly used for new investment and for creating new jobs. That is our policy.

Mr. William Hamilton

As regards the latter part of the Question—namely, the common agricultural policy—will my right hon. Friend give a further assurance that the Government will resist the pressure coming from the Opposition via the National Farmers' Union for a devaluation of the green pound, which would mean a substantial increase in the cost of living for the very poor people whom we are out to protect?

Mr. Hattersley

I said publicly last week that if we were to accept a total revaluation of the green pound it would result in a 7 per cent. increase in the food index. Clearly, in present circumstances that is unacceptable. I have no reason to believe that the Government will change their mind on that.

Mr. Giles Shaw

Will the Secretary of State give an indication of what the Government believe should be an adequate level of profit, in view of the Price Commission's recent statement that 16 per cent. is excessive? What is the Secretary of State's view on the average level of profit?

Mr. Hattersley

That clearly varies from industry to industry. Even then it is calculated not on one but on two rather complicated economic formulae. We shall have an opportunity to debate those formulae this evening. That will be a better opportunity than to do so in 30 seconds at Question Time.