Retail Price Index

HC Deb 25 July 1977 vol 936 cc6-12

5. Mr. Wyn Roberts

asked the Secretary of State for Prices and Consumer Protection what is the current percentage rate of increase in the retail price index.

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

The latest figure available is the increase for June, published on 14th July. It was 1 per cent., well in line with the forecast that the rate of inflation will begin to decline in the autumn.

Mr. Roberts

Is it not a fact that year upon year to last month the retail price index has gone up by 17.7 per cent.? Is not that deplorable figure higher than in any other industrialised country? Is it not the case that the true figure for inflation over the past year would be still some points higher, nearer the wholesale price index increase of 20.9 per cent.?

Mr. Hattersley

It is a fact that year on year the index went up by 17.7 per cent. It is not a fact that the true rate of inflation is even higher. That selective figure is normally offered by the Opposition on a different Question and I have no doubt that the hon. Member for Gloucester (Mrs. Oppenheim) will want to make her prejudiced point on Question No. 7.

Mr. Molloy

Is it not a fact that one of the longest sittings of this House was because of the attitude of the Opposition in opposing any form of price control? Is it not therefore deplorable that we should have such two-faced Questions from the Opposition when they are not in favour of any form of price control? Does not my right hon. Friend agree that he has to be successful in his policy because it has such a vital contribution to make to the next round of wage bargaining?

Mr. Hattersley

It is widely understood in the country that the Opposition fought the Price Commission Bill in this House and subsequently in the House of Lords for so long because of their determination to have no form of price control at all. I noticed the references in every newspaper to the cheers which went up from the Opposition on the second day of the Report stage in this House when the prospect was mooted that the Bill might be lost. If we are to have a prosperous economy in the years to come, we need a moderated price prospect, just as we need a moderated wages prospect. These two factors influence each other, and we must therefore play our full part in bringing that situation about.

Mrs. Sally Oppenheim

Does not the right hon. Gentleman agree that, despite the social contract, subsidies, the Price Commission Act and other various and assorted gimmicks, even if single-figure inflation is reached next year prices will have risen by 100 per cent. under this Government? That is a matter for the deepest shame and not for the kind of boasting that he has brought to the House today.

Mr. Hattersley

I am grateful to have got the supplementary question on Question No. 7 earlier. The hon. Lady must understand that, in common with every other industrialised country, the United Kingdom suffered the major disadvantage of an oil price increase two years ago, with a number of economic disadvantages flowing from that. In the last two years we have made substantial strides in improving the economy. After all the depressing things that the hon. Lady has said about what has happened over the last two years, I look forward to seeing her at that Box after Christmas rejoicing with me about the fall in the rate of inflation which will have come about.

7. Mr. Edwin Wainwright

asked the Secretary of State for Prices and Consumer Protection what has been the percentage increase in the cost of living during the past 12 months at the latest available date; what were the figures on the corresponding date for the two previous years; and what action he is taking to bring the future percentage down.

12. Mr. Peter Bottomley

asked the Secretary of State for Prices and Consumer Protection whether he will give the three-monthly increase in the retail price index expressed at an annual rate.

Mr. Hattersley

The percentage increase in the cost of living over the 12 months to June 1977, as measured by the retail price index, was 17.7 per cent. In the 12 months to June 1975 and June 1976 it was 26..1 and 13.8 per cent. respectively. The most recent three-monthly increase is 4.4 per cent. to June 1977. For what it is worth, this gives a figure of 19 per cent. on an annualised basis. As I have already said, the rate of inflation is expected to fall substantially in the months ahead, as foreshadowed in the Chancellor's forecasts. The measures announced by the Chancellor on 15th July and the Price Commission Act will reinforce this expected deceleration.

Mr. Wainwright

I thank my right hon. Friend for giving so much information. Is he satisfied that he has sufficient powers further to reduce the cost of living? Is it not true that he can prevent prices from increasing in certain circumstances but that he cannot compel wholesalers and retailers to reduce them? Will he do something about the cost of frozen chips? Is he aware that when potatoes cost £200 a ton the cost of frozen chips went up correspondingly but that since the price of potatoes has come down to £100 a ton and less the price of frozen chips has remained at the higher figure?

Mr. Hattersley

On the general point, I am satisfied that the new powers in the Price Commission Act which come into force on 1st August will be a substantial help in the fight that we are trying to wage, and in certain circumstances we expect a reduction in prices. A general reference from me about prices in a whole sector could result in prices over a wide range of products being reduced if the Price Commission so recommended.

On the more specific question, I am advised that paragraph 25 of the existing Price Code insists that where there is a net reduction in costs prices should be so constructed as to reflect that reduction. Frozen chips are a matter of great concern and are the subject of many letters to my Department. My officials are discussing with the Price Commission whether the reduction in cost is being adequately reflected in the price to the consumer.

Mr. Bottomley

Will the right hon. Gentleman confirm that there is not much that the Government can do further to reduce prices, because they have not been coming down at all over the past three years? Secondly, can he tell the House why other countries do not appear to have suffered as much as we have from rising prices, and whether it is the Government's aim to reduce our level of price increases to that of our international competitors?

Mr. Hattersley

The power to reduce specific prices exists in the Price Commission Act. Our inflation rate has been at a high level compared with our industrial competitors for a variety of reasons. We have been more vulnerable to outside pressures and to pressure on sterling than have most other European and North Atlantic countries. However, thanks to the efforts of the Government, sterling is now stable, and that is why there is a better price prospect for 1978.

Mr. Lipton

How does my right hon. Friend work out tie percentage increase in the cost of living. in which the price of beer is an ingredient, when no two pubs charge the same price and when the cost of a pint of beer varies enormously, even in one street?

Mr. Hattersley

The calculation of the RPI is a technical matter. I should be ruled out of order if I were to try to describe it in the next 20 minutes, but it is statistically accurate. It is not a perfect pattern of spending for every family, but it is an indication of how prices have risen in the recent past.

Mr. Neubert

With inflation-proofed pensions, with an index-linked savings scheme, with index-linked welfare benefits and now with index-linked personal tax allowances, does not the right hon. Gentleman get the feeling that he is fighting a losing battle against inflation? Is not there a danger that increasing income without controlling wage costs and import prices is inflationary?

Mr. Hattersley

No, Sir. With the monthly increase in the index at 1 per cent. or less for six out of eight months, I sometimes get the feeling that we are winning the battle against inflation.

8. Mr. Blaker

asked the Secretary of State for Prices and Consumer Protection what increase in the retail price index over the last 12 months has resulted from the common agricultural policy of the European Community.

Mr. Hattersley

Roughly one-half of 1 per cent.

Mr. Blaker

Will the right hon. Gentleman give that figure the maximum possible publicity and inform the Secretary of State for Agriculture, Fisheries and Food, who does not seem to have got the message?

Mr. Hattersley

He is the Minister of Agriculture, Fisheries and Food, and he was the first to quote statistics very similar to those that I have given. Not only has my right hon. Friend got the message, but he has helped to bring about this situation. It is because of the way in which he has negotiated in Brussels that prices in this country have been kept down in the way that they have.

Mr. Frank Allaun

As so many essential foods can be bought more cheaply outside the Common Market, the figure that my right hon. Friend has given will be treated with considerable scepticism by most housewives.

Mr. Hattersley

It will be treated with disbelief by those who do not want to believe it. I think that my hon. Friend needs to provide much more convincing evidence than has been provided so far that substantial savings in food prices are to be achieved by buying cheap food from outside the Community. The evidence is that if the cheap food exists at all it does not exist in quantities that would radically change the British spending picture.

Mr. Hooson

Does the right hon. Gentleman agree that the prices of animal feeding stuffs are coming down for the first time for many months, and does he expect that trend to continue?

Mr. Hattersley

I need notice of that question to be able to answer it.

Mr. Biffen

So that we may assess the significance of the ½ per cent. to which the right hon. Gentleman referred, will he circulate in the Official Report what prices he thinks would have been paid for temperate foodstuffs which are important to this country if Britain had been out-side the EEC for the period under review?

Mr. Hattersley

I do not think that it is possible with any statistical legitimacy to describe what prices I think might have been paid in different circumstances. What I shall do, as I have done already for some sceptics, is to describe publicly the statistical method that brought about this figure. I cannot remember whether I described it in individual letters or in the Official Report, but I shall do so in the Official Report in future if I have not done it already.

Mr. Newens

Does my right hon. Friend agree that if the green pound had been revalued along the lines suggested by Conservative Members the rise in the cost of living would have been considerably greater than has been the case? Is it not therefore hypocritical of right hon. and hon. Members opposite to criticise what has been done by the Government in this respect?

Mr. Hattersley

Of course. Had the green pound been changed in value to represent the normal value of the pound against the dollar, the picutre would have been substantially different. That is why am sure we are right to insist that the only possible devaluation is one that is matched by other benefits to the British consumer and why the attitude of right hon. and hon. Gentlemen opposite differs from price debates to common agricultural policy debates.

Mr. Marten

Does the compilation by the statistical department of the figure given by the right hon. Gentlemen include such things as the cost of all the intervention stores, the food thrown away through failing to meet the size set by the Brussels bureaucracy, an apportionment of the overheads of the Common Market bureaucracy and the cost of not buying cheaper food where it exists outside the Market? Is all that included?

Mr. Hattersley

Of course.