HC Deb 10 February 1977 vol 925 cc1652-4
Q2. Mr. Ridley

asked the Prime Minister if the television broadcast by the Secretary of State for Foreign and Commonwealth Affairs on 17th January 1977 on "Panorama" on economic policy represented Government policy.

The Prime Minister

I refer the hon. Member to the reply which I gave to the hon. Member for Northampton, South (Mr. Morris) on 8th February.

Mr. Ridley

Is it not now clear that the Labour Party is the party that believes that a high rate of unemployment is the way to keep wages down? Does the Prime Minister not think that he is actually overdoing it? If he brought down interest rates a little and encouraged a little bit of expansion he might be able to provide a few more jobs and prosperity for our people.

The Prime Minister

The hon. Gentleman should know that interest rates have come down from 15 per cent. to 12 per cent. If we manage to keep on top of the rate of inflation, even without the hon. Gentleman's support, I trust that interest rates will be able to continue to come down. But to some extent they, like the rate of sterling, will reflect the rate of inflation, and inflation is still our major enemy. If we do not conquer that, unemployment will go even higher than it is today. The suggestion that unemployment is used as an instrument is completely and utterly false.

Mr. Ridley

That is what the Government are doing.

Mr. David Steel

In considering the next stage of discussions on income controls will the Prime Minister consider exempting from restraint new profit-sharing schemes in industry, on the ground that they are more likely to introduce harmony, partnership and productivity than anything contained in the Bullock Report?

The Prime Minister

I shall bring that to the notice of the Chancellor. The discussions that he is now having will take place with both sides of industry. All these matters can be considered. I have frequently referred to the fact that this third year will be the most difficult of all. People are inevitably impatient with the situation. That I understand. But there is no better way. No one has been able to point one out, certainly not the Opposition.

Mr. Atkinson

Does my right hon. Friend agree that wage restraint in itself it not sufficient to keep down the rate of price inflation? There needs to be something else by way of price control in order to make sure that the country and trade unionists derive benefit from the sacrifices that they are being asked to make. Will my right hon. Friend bear in mind that trade unionists are feeling somewhat sick that it is they who are continually being asked to make sacrifices and that their living standards are about to go down still further? Will the Prime Minister give confidence to the discussions now taking place by announcing shortly that the Government intend to bring in price controls? That is the only way in which trade unionists will now consider phase 3 of the wages policy.

The Prime Minister

I agree with my hon. Friend that the trade union leaders will have an extremely difficult time this year trying to convince their members of the benefit of this inevitable policy. It is a policy that must succeed, and we must all work to that end. I shall certainly do all I can to make it succeed.

My hon. Friend is right about prices. Inevitably these two things are compared, but he will know, as we all know, that to a large extent commodity prices and the price of imported raw materials are not under our control. For example, the quintupling of oil prices led to a great deal of unemployment not only in this country but throughout the world. When we are considering what can be done to control prices we must take these factors into account. But we shall take every step that we can to make sure that profit margins are not excessive and that prices are kept under control.

Sir G. Howe

May I return to the point made by my hon. Friend the Member for St. Marylebone (Mr. Baker) about exchange rate policy? Does the Prime Minister acknowledge that one other factor that would keep up prices would be any attempt to hold down the exchange rate? That would also have the effect of keeping up interest rates. Can the Prime Minister tell the House whether the authorities are deliberately intervening to hold down the exchange rate, and, if so, with what objective and for how long?

The Prime Minister

It is not the custom to discuss exchange rate policy in that kind of detail. I do not propose to do so this afternoon. Whatever the Opposition may feel about giving signals to people in the City, it is not my desire to do so.