HC Deb 13 July 1977 vol 935 cc434-6

3.43 p.m.

Mr. Peter Viggers (Gosport)

I beg to move,

That leave be given to bring in a Bill to provide information about inflation.

It is a routine parliamentary courtesy to apologise for not following previous remarks or discussions, but I am sure that you, Mr. Speaker, will be the first to forgive me if I do not follow any of the points raised in the last 10 minutes.

My Bill is a modest measure to publicise and draw attention to the rate of inflation. During the last three years we have suffered the highest level of inflation in the developed world, with the sole exception of Italy. The current rate of inflation of 17.5 per cent. compares with much lower percentage rates in France, where it is 9.5; West Germany, 3.8: Japan, 8.6; and the United States, 6.8. At the current level of 17.5 per cent, the true value of money halves every four years‥

The present situation is particularly disturbing because Ministers appear to be incapable not only of controlling the level of inflation but of forecasting the future rate. Every one of the Chancellor's forecasts on the inflation rate over the last three years has been substantially overoptimistic, and we should ask why. The answer of course is that the Government take the view that inflation can be talked down. The Government hope that wage and price increases will be moderated if fears of inflation can be calmed. By reducing the expectation of inflation the Government hope to reduce inflation itself.

But is this talking down of inflation succeeding? It certainly has not succeeded in the past, and this week the Government's negotiations with the unions appear unpromising. The Prime Minister and the Chancellor have said that a mere fig leaf of a pay policy will not be enough but it looks as if they will not even get their fig leaf. They seem destined for full frontal failure. Is it in the public interest that we should all be soothed about inflation? Surely it is better that we should face up to inflation and ponder on its implications?

Inflation redistributes capital and income. As a general rule it favours the young against the old and the profligate against the frugal. Above all, it redistributes money from the individual to the State. It discourages saving and it discourages planning. It develops a philosophy of "live now, pay later". This is seriously damaging to our society and way of life. But how are we to focus attention upon the vicious social pressures caused by inflation? How do we publish and advertise the damage it causes?

Let us look at the damage to savings. An investment of£100 in a building society yields interest of about£10 a year, but this is not enough to keep up with the rate of inflation, and an investor with a building society is actually worse off in real terms at the end of the year than he w4,s at the beginning. The current rate of interest on National Savings held for the full four years is 7.59 per cent., but this compares with a rate of inflation that is about 10 per cent. higher. An investment of£100 in National Savings will result in the saver having£90 in real terms at the end of one year and actually being £10 worse off in real terms. On this basis, building society deposits and National Savings are nothing less than a massive confidence trick perpetrated on a gullible and bemused public.

How can we restore sanity and honesty to the situation? My Bill suggests ways in which public attention can he focused upon inflation and its effect upon savings, and I have taken as a model the Act which prevented misleading advertisements in hire purchase agreements. The House will recall that the Advertisements (Hire Purchase) Act 1967 contained provisions which required full information to be given to a prospective customer in order to enable him to judge all the financial effects of a hire purchase transaction such as deposit, length of period of the agreement and so on.

My Bill similarly proposes that post offices and other places which advertise that they accept fixed-interest savings should carry a notice or warning to savers of the full implications of the transaction and in particular they should be told of the true rate of return on their invest- ment after taking inflation into account. For this purpose, I suggest that the inflation rate should be based on the latest three months' figures. An advertising agency will no doubt find suitable wording, but the warning to savers might be on the lines of the warning that cigarette packets carry for smokers. The notice might read Warning: saving can damage your wealth".

I must emphasise that my object is not to undermine and attack personal savings. My intention is to restore honesty and elementary common sense to a subject which is widely misunderstood.

The Government need to mobilise public opinion in the battle against inflation. We have all become accustomed to hearing our leaders appeal for moderation in wage demands, but such appeals have been weakened in their impact because they have been accompanied by soothing assurances about the future rate of inflation. The true, stark, unfair facts are that decent hard-working people who have planned and saved throughout their lives in order to enjoy a comfortable retirement are being systematically ruined by inflation and Parliament has a duty to do something about it.

In a democracy the right way to take action is to ensure that the facts are understood and then to build upon a platform of knowledge. The modest purpose of my Bill is to publish and advertise the effect of inflation upon savings and so mobilise public opinion on an informed basis.

Question put and agreed to.

Bill ordered to be brought in by Mr. Peter Viggers, Mr. Ralph Howell, Mr. Ian Lloyd, Rear-Admiral Morgan-Giles and Mr. T. H. H. Skeet.