HC Deb 10 November 1977 vol 938 cc832-4
4. Mr. Dykes

asked the Chancellor of the Exchequer if he is satisfied that his recent measures will effectively bring down the rate of inflation in 1978.

Mr. Healey

The measures that I announced on 26th October, coupled with those in the Budget, will encourage moderate settlements within the Government's guidelines. This is critical to the Government's intention of getting the inflation rate down to single figures in the first half of 1978 and keeping it there throughout the year.

Mr. Dykes

Looking back, now that we have just passed the third anniversary of his 8.4 per cent. inflation prediction in 1974, does the right hon. Gentleman not sincerely regret that prediction and its misleading effect? Precisely when does he think that the 8.4 per cent. figure will be reached?

Mr. Healey

It was not a prediction that I made in 1974; it was a statement of a fact that the annual rate of price increases in the three months before I spoke was 8.4 per cent. It has been rather less in the past three months.

Mr. Hoyle

Does my right hon. Friend intend the 10 per cent. guideline to apply right across the public sector, and, if he does, why does it not apply to the Civil List? Is there one law for the ordinary person annd another for the more privileged people of our society? Particularly in view of a distinguished personage's comments about over-large staffs of nationalised industries, perhaps this is one sector where we could cut down on the staff.

Mr. Healey

On my hon. Friend's last point, I think that the famous remark about glass houses may well be apposite in this case. On the general point, my hon. Friend must be well aware that two-thirds of the increase in provision under the Civil List represents an increase within the pay policy for those men and women—many of them not very well paid—who work in the Royal establishments. The rest is largely accounted for by exceptional expenditure on the Jubilee, which has brought benefit directly to our balance of payments of several hundreds of millions of pounds.

Sir G. Howe

Does the Chancellor accept that even more important than the point that he stressed in answer to my hon. Friend the Member for Harrow, East (Mr. Dykes) is the maintenance of strict control of the money supply? Does he understand that there is some concern —I do not want to overstate it on the strength of one month's figures—about the movement of M3 that seems to be taking place, and also about the rapid growth in Ml, which is sometimes a leading indicator? Will he also tell the House when he is likely to announce his monetary targets for next year, which are of even more importance, bearing in mind that he announced them last year at the time of his letter to the IMF in December 1976?

Mr. Healey

The spectacle of Satan advocating virtue is at least a little more agreeable than that of Satan rebuking sin. But, as the right hon. and learned Gentleman will know, the Government have been virtuous in dealing with the money supply ever since they inherited the consequences of his right hon. Friend's profligacy, and we have every intention of maintaining control. He is perfectly right that the money supply is liable to fluctuations from month to month—even from quarter to quarter—and this has been recognised as being not a matter of concern by both the Federal Reserve Bank of New York and the Bank of England. What is important is that over the longer run the monetary aggregates are maintained, and that is the Government's intention.

As for the levels for next year, we plan to announce them at the appropriate time.

14. Mr. Rooker

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

22. Mr. Skinner

asked the Chancellor of the Exchequer what is the latest official figure for the rate of inflation; and if he will make a statement.

Mr. Healey

The Index of Retail Prices rose by 15.6 per cent. over the 12 months to September. This is the third successive month in which the rate of inflation has fallen. It is expected to fall further to 12 per cent. or 13 per cent. by the end of the year and should reach single figures in the first half of next year.

Mr. Rooker

Will my right hon. Friend confirm that the very welcome increase in the old-age pension which is due next week was fixed in May on the basis that the inflation rate year-on-year in November would be 13 per cent.? As the inflation rate is slightly above that, will my right hon. Friend give permission to the Secretary of State for Social Services to accept a friendly Back Bench amendment to the Pensioners Payments Bill to make up the difference?

Mr. Healey

Any friendly gesture from anyone, particularly from my hon. Friend, will be received in the spirit in which it is made.

The level of the retail prices index in November will not he known until the middle of December, but it is already clear that it will be well below the 14.4 per cent. increase in the old-age pension which is now coming into effect.

Mr. Rifkind

In view of the reply given to my hon. Friend the Member for Chingford (Mr. Tebbit), will the Chancellor repudiate the absurd proposition of the Prime Minister that inflation since 1974 has not led to a decrease in the standard of living of a married man with two children?

Mr. Healey

My right hon. Friend made no remark of that nature.