HC Deb 14 October 1976 vol 917 cc609-11
5. Mr. Rooker

asked the Chancellor of the Exchequer what is the rate of inflation at the latest date.

10. Mr. Peter Morrison

asked the Chancellor of the Exchequer what is the present rate of annual inflation in the United Kingdom, the United States of America, Japan, West Germany and France.

13. Mr. Arnold

asked the Chancellor of the Exchequer if he is satisfied with his progress in achieving his target for reducing the rate of inflation; and if he will make a statement.

Mr. Joel Barnett

The increase in the Retail Price Index for the 12 months to August was 13.8 per cent. We have already made considerable progress in bringing down the rate of inflation, but we shall not be satisfied until the United Kingdom rate is at least down to the levels of our main overseas competitors. The latest available OECD figures show that for the 12 months to July inflation was running at 9.5 per cent. in Japan, 9.4 per cent. in France, 5.4 per cent. in the United States of America and 4.1 per cent. in West Germany.

Mr. Rooker

Why do my right hon. Friend and his hon. Friends insist on sending up the British inflation rate again by insisting on the removal of food subsidies, which were one of the main planks in the election manifesto on which we all came to power and which, as we are constantly reminded, we have to retain? Why are we sending the inflation rate up again?

Mr. Barnett

I am sure my hon. Friend will appreciate that, however one deals with the particular matter to which he referred, the money has to be found for that rate to be financed, and that in turn will have some effect on inflation. I am also sure he will appreciate that we are determined to see, wherever possible, that we keep down the level of food prices. For example, he will know that we are determined to resist the pressure on us to devalue the green pound, which I know some Conservative Members want to see devalued.

Mr. Morrison

Will the right hon. Gentleman now answer the question put by my hon. Friend the Member for Guildford (Mr. Howell)—namely, what he expects to be the rate of inflation for next year? Can he say how he expects the pound to pick up when our inflation rate is still way above that of our major competitors?

Mr. Barnett

The hon. Gentleman is quite right. One of the reasons for the depreciation of the pound is that our inflation rate is higher than the rate in other countries. We have to get that down and we are determined to do so. Over the next few months, one anticipates that the rate of inflation will be broadly at the present level, but I am certainly not prepared to make any forecasts beyond that.

Mr. Ioan Evans

Does my right hon. Friend agree that the rate of inflation has been brought down because of the cooperation of the trade union movement through the social contract in restraining earnings and income? Will he and his Department look at the proposals which the TUC has brought forward, not so much for import controls right across the board as for selective import controls, so that we can get many more people back to work?

Mr. Barnett

Of course, the social contract is absolutely central to the Government's policy. If one contemplates what would happen under the proposals of the Conservative Party, which would break the social contract and add hugely to inflation, one realises the sort of problem that this country would face. As regards import controls and the suggestions of the TUC, my hon. Friend will appreciate that we have already taken a great many steps concerning selective import controls.

Mr. Arnold

What, approximately, will the recent depreciation in sterling add to the rate of inflation?

Mr. Barnett

I do not think one should exaggerate the effect of that either. It tends to be exaggerated frequently. The effect is somewhere in the region of one-quarter of 1 per cent. for every 1 per cent. of the depreciation. It is around that kind of level.

Mr. Noble

With regard to the problems of selective import controls, does my right hon. Friend agree that the real meaning of selective import controls is that they have to be effective? Does he agree that the controls on black-and-white television sets have done more for the Japanese television industry than for the British industry? Will he take into account the Chancellor's statement in July and get on with introducing selective controls, particularly in the sensitive industries of textiles and footwear?

Mr. Barnett

My hon. Friend will know that I have a particular interest in some of the areas to which he has referred. Certainly I want to see effective action taken in respect of dumping. I believe that action will be taken and is being taken. I certainly cannot agree with what my hon. Friend said about television sets.

Mr. David Howell

Can we take it that the Government's target of single-figure inflation in the early months of next year has now been officially abandoned?

Mr. Barnett

Yes.