HC Deb 27 January 1977 vol 924 cc1688-9
10. Mr. Michael McNair-Wilson

asked the Chancellor of the Exchequer what is the current inflation rate.

Mr. Joel Barnett

The retail price index rose by 15.1 per cent. over the 12 months to December 1976.

Mr. McNair-Wilson

Can the right hon. Gentleman say to what special factors he attributes the present level of inflation? Will he hazard a new guess about when single-figure inflation will be reached?

Mr. Barnett

The answer to the latter question is "No". A whole range of matters has affected our level of inflation, including the depreciation of sterling and our general level of industrial performance in comparison with other countries.

Mr. Ian Stewart

Does the right hon. Gentleman accept that the rate of inflation is related to exchange rates? Does he agree with the Financial Secretary that the exchange rate is being dictated by the level of overseas demand or otherwise for sterling rather than by the policy of the Bank of England? Will he ask the Chancellor of the Exchequer to state clearly to the Governor of the Bank of England at their next meeting the Government's priorities? Are they to keep down the exchange rate to fund the borrowing requirement, to encourage the inflow of funds, which is against the Chancellor's expressed intention to run down the private balances, or to allow the British people some alleviation of inflation in the coming months?

Mr. Barnett

As anyone who was present will recognise, the hon. Gentleman has totally distorted the views of my right hon. Friend the Financial Secretary. It is our intention to bring down the rate of inflation as fast as possible and we have a better chance of doing that and of getting a sensible pay round in our negotiations with the TUC than we should if we pursued the policies proposed by the Opposition.

Mr. Gould

Does my right hon. Friend agree with the United States Treasury's strongly held views that the depreciation of currency is a consequence of and not a cause of inflation? Has he any comment on the statement by the Under-Secretary for Economic Affairs in the new Carter administration that the fall in value of the pound last year was probably not enough to take account of our comparative inflation rates?

Mr. Barnett

My hon. Friend is right on two counts in regard to the views of the United States Treasury. The exchange rate has an effect on inflation and inflation affects the exchange rate; we have a sort of vicious circle. The way in which our economy is now moving gives us every confidence that we shall be able to achieve a stable exchange rate and a lower rate of inflation.