HC Deb 27 April 1978 vol 948 cc1624-5
7. Mr. Neubert

asked the Chancellor of the Exchequer what is the latest annual rate of inflation.

Mr. Joel Barnett

In the year up to March 1978 the retail prices index rose by 9.1 per cent. I shall not be satisfied with our progress until our inflation rate is down to the level of our international competitors.

Mr. Neubert

As the Chancellor of the Exchequer stated on 15th July last year that the double-figure increase in earnings would mean double-figure inflation, what prospects are there for inflation with aggregate earnings running at 14 per cent.?

Mr. Barnett

First, we do not know what aggregate earnings are running at. But the hon. Gentleman is surely aware that although earnings represent a major part of industrial cost, they are not the only element. Indeed, it will be clear to him that that is the case, because we have a 9.1 per cent. year-on-year rate of inflation.

Mr. Kilroy-Silk

What prospects are there for inflation if we are to remove all control of prices, as the Opposition want?

Mr. Barnett

I never try to make forecasts about what would happen if we did what the Opposition wanted. What we know is that the rate of inflation, year on year, will be down to 7 per cent. by this summer, and should stay there throughout the rest of this year.

Mr. Tapsell

Has the Chief Secretary noted that the almost unanimous reaction to the Budget has been that rising public expenditure, combined with the consequential fall in the international value of sterling, is likely to bring about a rising rate of inflation from the second half of this year?

Mr. Barnett

I know that the hon. Gentleman, when not in the House, spends most of his time in the City, and that it may be the view that he hears there. The fact is that the rate of inflation next year should continue to decline, but it will do so only if we have moderation in pay settlements. It will also depend, of course, on what happens to the growth of world trade and to import prices. The simplistic view that the hon. Gentleman and his friends in the City seem to be taking is a misleading and wrong view of what is likely to happen.