§ 2. Mr. Neubert
asked the Chancellor of the Exchequer when he now expects an annual year-on-year rate of inflation of 15 per cent. to be reached.
§ The Chancellor of the Exchequer (Mr. Denis Healey)
In revising the forecast published on 15th December, we shall take into account that the general prospects for 1977 are already significantly better than they were then. In the meantime, it would not be useful for me to guess at the outcome of that revision.
§ Mr. Neubert
Just how high will inflation rise in the meantime? Despite the Government's claim of halving inflation, does the Chancellor realise that only in one month out of the 19 months since the Government started attacking this problem has the annual rate of inflation been as little as half what it was a year before?
§ Mr. Healey
I am aware that inflation has risen in recent months, and it may well rise a little more before it begins to fall. But the fact that the £ sterling is now worth 15 cents more than in October, and that interest rates have fallen by 3 per cent., already, makes the outlook a good deal brighter for the rest of this year than it was even two months ago.
§ Mr. Pardoe
Will the Chancellor confirm that inflation would have been substantially higher had it not been for wage restraint? Would he care to estimate what part of inflation over the past 12–month period, for which he has figures, was occasioned by earnings increases and what part of it was occasioned by the rise in the price of imports?
§ Mr. Healey
I hope the House will not expect me to give that in precise percentage figures, but I can give it in broad terms. It is broadly the case that the rate of inflation in 1975 was caused by about two-thirds wages and one-third import prices. Last year it was about equal between wages and import prices. This year it is likely that import prices will play by far the larger role. That strongly confirms the point made by the 1610 hon. Gentleman that the pay policy, which has been observed so universally by the working people of this country, has made a major contribution to getting this problem under control. I am glad that the hon. Gentleman is not a member of the unholy alliance referred to by the right hon. Member for Worcester (Mr. Walker) between the Opposition Front Bench and the Communist Party on this matter.
§ Mr. Gould
Does my right hon. Friend agree that, in the context of the pay policy, the trade unions are no doubt concerned about the cost of living but are even more concerned about the standard of living? Does he agree, further, that we shall boost our standard of living only if we produce and sell more? Does not this mean a determined policy for export-led growth?
§ Mr. Healey
For once, I agree with every clause of my right hon. Friend's excellent supplementary question. So long as he sticks to that level of generality there will not be very much between us.
§ Sir G. Howe
Does the right hon. Gentleman recall taking credit in October 1974 for the fact that inflation was then running at 8.2 per cent? Will he now agree that, on the same basis, it is running at 23.6 per cent., and will he accept his responsibility for that disastrous state of affairs?
§ Mr. Healey
I accept my responsibility for all those matters which it lies within my power to influence, but the right hon. and learned Gentleman will be aware, from the nature of his supplementary question, that in the statement that I made in October 1974 I quoted separately the 12–month inflation rate, the six month inflation rate and the three-month inflation rate, and he never disputed that I was accurate on each quotation.