HC Deb 07 February 1977 vol 925 cc1025-8
1. Mr. Durant

asked the Secretary of State for Prices and Consumer Protection what is the latest monthly increase in the retail price index.

7. Mr. Canavan

asked the Secretary of State for Prices and Consumer Protection what is the latest figure for the rise in the retail price index.

9. Mr. Rathbone

asked the Secretary of State for Prices and Consumer Protection by how much the retail index has risen since February 1974.

16. Mr. Gow

asked the Secretary of State for Prices and Consumer Protection what is the year-on-year increase in the retail price index.

The Secretary of State for Prices and Consumer Protection (Mr. Roy Hattersley)

The retail price index for December showed an increase of 1.3 per cent. over the previous month and an increase of 15.1 per cent. compared with the same month a year earlier. The index has risen by 65.2 per cent. since February 1974.

Mr. Durant

Is the right hon. Gentleman aware that that is a pretty appalling story? If prices since Christmas have been escalating at an enormous rate, with some items going up 3p or 4p when one would expect ½p, does not the right hon. Gentleman think that that will affect the next pay negotiations now going on with the Government and put pressure on the negotiations?

Mr. Hattersley

I am not sure what the hon. Gentleman means by "going up by 3p or 4p when one would expect ½p". What has happened over the past few months is that the depreciation in the sterling rate has worked its way through to domestic prices. Now that sterling has stabilised I believe that the position will improve, and I am sure that the trade unions will be wise enough to understand that in any wage agreement.

Mr. Canavan

Does my right hon. Friend agree that it is intolerable that the Government should restrict wages while allowing prices to escalate? We have now reached the ridiculous stage at which the Government stand idly by while pirates are allowed to charge housewives up to 15p a pound for potatoes, and ticket touts are charging football fans the extortionate sum of £55 for a couple of tickets for the Scotland-England international.

Mr. Hattersley

That is something of a multiple question, and I want to give a multiple answer. My hon. Friend used the wrong verb when he talked about the Government controlling wages. Wages are limited by agreement between the Government and the TUC and are a product of the TUC's understanding that that is in the best interests of the nation as a whole.

My hon. Friend had better put down a Question about the two commodities to which he referred so that I can give answers of a length that the problem deserves.

Mr. Gow

Does the right hon. Gentleman agree that trade unions and wage increases cannot cause inflation? Will he tell us what measures the Government propose to announce—since the Government alone can cause inflation—to reduce the present rate of inflation?

Mr. Hattersley

That is a primitive view of the economy, which I think is totally disregarded in all sophisticated quarters. Most of the hon. Gentleman's colleagues, particularly those who were in Government in 1970–74 and invented the Price Code, would regard that as a simplistic view of how the economy should be run.

Mr. Sedgemore

Does my right hon. Friend agree that one significant factor in the continuing rise of the RPI is the rise of between 30 per cent. and 60 per cent. in gross profit margins? Has the time not come to institute an inquiry into the relationship between gross profit margins, prices and investment, and could my right hon. Friend start by having an inquiry into gross profit margins in the brewery industry in particular?

Mr. Hattersley

My hon. Friend had better put down a Question about the brewery industry. As regards the general position, a great deal of exaggerated comment has been made about the effect of increased profit margins on the retail price index. I am sure my hon. Friend will agree that what we ought to consider is not the extent of profits but their use. Profits ploughed back into new investment to create new jobs is something that both my hon. Friend and I want to encourage.

Mr. Donald Stewart

Does the right hon. Gentleman accept that, in spite of the nice-sounding formula about a social contract, wages have been severely restricted, and that if the Government do not give some guarantee about price restrictions the game will be up for the next round?

Mr. Hattersley

It is a matter not of a nice-sounding formula but of a sensibly applied policy, which all the evidence confirms. It is also a policy that is necessary for the continued improvement in the economy. The TUC understands that, and it also understands that our ability to act on prices, though limited, is a policy that we shall operate to the full.

Mrs. Sally Oppenheim

Is the right hon. Gentleman aware that this Government's record on prices has nothing to do with success, complacency or sophistication? Has the right hon. Gentleman any idea what the cumulative effect of four years of double-figure inflation—which is what we shall have had by the end of this year—is likely to be on those who see their life savings wiped out and on those who have a day-to-day struggle to make ends meet and are fighting a losing battle? Is the right hon. Gentleman aware that whatever happens to prices by the end of this year they will have been higher for longer under this Government than ever before?

Mr. Hattersley

We are all moved by the hon. Lady's identification with the working classes. The important point to which she has to direct her attention is the overall success of our economic efforts. I do not believe that there is any sensible commentator who does not believe that the improvement in the economy that we expect for the rest of this year will not include an improvement in the prices position, and I am sure that ordinary people understand that.

Mr. Rathbone

rose—

Mr. Speaker

Order. The hon. Member for Lewes (Mr. Rathbone) puts me in some difficulty. He did not hear the answer to his Question. I shall call him, since his Question is being answered as one of a group.

Mr. Rathbone

I am grateful to you, Mr. Speaker. I have only just received a message that my Question was to be grouped, otherwise I would have been here in time. I have only just arrived. May I ask the Secretary of State whether, in the light of the points that my hon. Friend the Member for Gloucester (Mrs. Oppenheim) has made, he still stands by his statement that Socialism is an expensive business or whether he sees some reduction in the expense as part of his long-term plan for Britain?

Mr. Hattersley

That is a supplementary question that I am asked at almost every Question Time. I always confirm that I do believe that. The example I give is that it is more expensive to clear the slums than it is to leave people living in hovels. All of those things to which my party is committed require a high level of public expenditure. One of the reasons why I want to see the economy permanently stable is so that we can afford the sort of public expenditure that improves the quality of life.