Inflation

HC Deb 14 March 1977 vol 928 cc5-10

6. Mr. Grist

asked the Secretary of State for Prices and Consumer Protection what is the latest figure for the rate of inflation over the last three months expressed at an annual rate.

17. Mr. Rost

asked the Secretary of State for Prices and Consumer Protection what is the latest monthly increase in the retail price index, calculated on a year on-year basis; and by how much the index has increased since February 1974.

19. Mr. Tim Renton

asked the Secretary of State for Prices and Consumer Protection what is the latest three-monthly rate of price inflation.

Mr. Hattersley

Over the three and 12 months to January 1977, the retail price index increased by 5.4 per cent. and 16.6 per cent. respectively. This brings the increase since February 1974 to 69.5 per cent. For what it is worth, the three-month annualised figure is 21.8 per cent.

Mr. Grist

Does not the right hon. Gentleman feel a sense of shame at that last figure as it has risen so much from the vaunted 8.4 per cent. of the Chancellor of the Exchequer at the last General Election?

Mr. Hattersley

I do not feel very much about that last figure, except what I tried to imply in my answer, that it does not have much statistical validity.

Mr. Rost

As the Government's new anti-inflation policy appears to be to overrule their own independent Price Commission, would it not be better to scrap it?

Mr. Hattersley

In overruling the Price Commission, the Government would apply a provision in the Act for which the hon. Gentleman voted. He must make up his mind whether he was wrong in voting for that overruling provision. I think that it was right and necessary, and it can occasionally be applied properly.

Mr. Skinner

Does my right hon. Friend understand fully that the £6 pay policy and its successor have not resulted in the dramatic fall in price increases and inflation that he and his fellow Ministers in the Cabinet supposed? What with unemployment almost doubling in that period, prices rising, the social wage being cut and there being no further investment, is there any reason to carry on with another round of pay policy?

Mr. Hattersley

I think that there is every reason to carry on. [Interruption.] Unlike some Conservative Members, my hon. Friend has asked a question believing, as I do, that it is a serious issue. My hon. Friend knows very well that the increase in the retail price index over the past six months has been largely the result of sterling depreciation. I have no doubt that, if we did not reach agreement on another wages round, sterling would again be in jeopardy and inflation would be a great deal worse.

Mr. Giles Shaw

The right hon. Gentleman cannot have it all ways. Does he not agree that inflation figures of 69.5 per cent. are a tremendous condemnation of what the Government have done in the past three years? Will he use this opportunity of expressing his abhorrence of total price freezes, which can do nothing more nor less than to increase unemployment from its present hideous level?

Mr. Hattersley

I have already made it clear that in my view a total price freeze would be injurious to our industrial prospects and bad for the economy in general and working people in particular. As for the overall rate of inflation. I have no doubt that, if we remain resolutely committed to the policies we announced in December, the rate of inflation will begin to reduce in the summer and thereafter. I am sure that that is a right thing for us to do.

Mr. Heffer

Does my right hon. Friend agree that the high rate of inflation has been partly due to the common agricultural policy and to the fact that we are members of the Common Market, where food prices are much higher than anywhere else in the world? Is it not about time the Government renegotiated the CAP and stopped talking about renegotiation?

Mr. Skinner

It is time we got out altogether.

Mr. Hattersley

I think that my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) will agree that the position being taken by my right hon. Friend the Minister of Agriculture, Fisheries and Food in the negotiations in Brussels, which are concerned with prices next year, reflects our intention of being very tough during the discussions and having no price increases which would be injurious to our general economic policy. But I am sure that he also accepts that what has really affected inflation in this country over the past year is the sterling rate of exchange. I do not care to contemplate how sterling would have deteriorated in October and November of last year had we not been members of the Commons Market.

Mr. Tebbit

Does the right hon. Gentleman think that an inflation rate of 16.6 per cent., if he wants the year-on-year figure, or nearly 20 per cent., if he wants the three-month figure, marks a successful Government policy?

Mr. Hattersley

I believe that it marks a policy which will improve with the summer. [HON. MEMBERS: "Which Summer?"] The Opposition must decide whether they want to support us in policies that will result in a gradual but continual improvement in the inflation figure. The effects of the December measures will soon work themselves through and there will soon be another wages round. When that is debated, the Opposition will have to decide which side they are on.

8. Mr. Adley

asked the Secretary of State for Prices and Consumer Protection if there has been a rise or fall in the rate of inflation in the United Kingdom in the last six months; and how this compares with the trend in the other EEC countries.

Mr. Hattersley

Over the six months to January 1977, the year-on-year rate of inflation in the United Kingdom has increased from 12.9 per cent. to 16.6 per cent. Exactly comparable information for other member States is not available, but to December the average rate of inflation for these countries was similarly on an upward trend.

Mr. Adley

Is the right hon. Gentleman aware that, according to statistics from his own Department, inflation has risen every month in Britain for the past six months, a very different pattern from that in Belgium, Denmark, France, West Germany, Luxembourg and the Netherlands, to name but six? Apart from the fact that we are unfortunate in having an ineffective Government, what is so special about Britain compared with the other countries of Western Europe?

Mr. Hattersley

I am simply relying on the information that the Treasury gave the hon. Gentleman on 3rd March. One of the things that is special about us is that on the December figures our rate of acceleration is a good deal less than that of many of our partners.

Mr. Skinner

Will my right hon. Friend confirm that what the other Common Market countries did when they participated in the recent IMF loan was to lend us the money in order for us to continue to buy their goods?

Mr. Hattersley

I think my hon. Friend will agree that that is somewhat of an over-simplification of what the loan provided. It also provided us with the wherewithal to go on selling our goods to Europe and to keep the British economy afloat. Without the IMF loan, the country would have been in a very difficult situation.

Mrs. Sally Oppenheim

Does the right hon. Gentleman recall that in a speech at Blackpool last April the Prime Minister boasted that on the previous six months' figures the rate of inflation had halved? Is the Secretary of State aware that if one takes precisely the same yardstick as the Prime Minister took then the rate of inflation has not halved or doubled but has trebled? Will the right hon. Gentleman say how long he expects that this country can go on with rates of inflation which are double and treble those of our main competitors?

Mr. Hattersley

That extraordinarily selective use of figures does not excite me half as much as it clearly excites the hon. Lady. The figure is the year-on-year rate. The increase in the year-on-year rate has decelerated, and the hon. Lady will find that if she asks me or someone else that sort of question towards the end of the year the position will be appreciably improved.

Mr. Molloy

Is my right hon. Friend aware that the real thing that could damage this country would be if the prices of food, clothing and footwear which obtain in Common Market countries were applied here? We would be in a very serious situation indeed. That is why so many people from the other eight Community countries are prepared to come over here at the weekends in order to stock up and go back home because, despite our so-called inflation, the price of the goods that I have mentioned is much cheaper in the United Kingdom than in the EEC countries.

Mr. Hattersley

Of course they are, and many of them are so kept by the green pound, which is something that we have to maintain and preserve. My hon. Friend well knows that all those people who come here are earning EEC wages and paying United Kingdom prices. I hope that we can get to the day when we, too, will be earning EEC wages in this country.

Mr. Marten

May 1, unusually, come to the help of the right hon. Gentleman in his answer to the question of my hon. Friend the Member for Christchurch and Lymington (Mr. Adley)? Is not one of the reasons why our inflation has gone up more than that of our Common Market partners, certainly the old Six, that the CAP and the transitional stages have forced up the price of food?

Mr. Hattersley

That is certainly a factor, but statistically it is a small factor indeed compared with the major reason, which is the depreciation of sterling.