HC Deb 30 January 1978 vol 943 cc14-6
11. Mr. Gow

asked the Secretary of State for Prices and Consumer Protection if he expects the Price Commission to report on its consultations with the TUC.

Mr. Hattersley

The Price Commission referred to certain discussion with the TUC in its quarterly report for August-October 1977. The extent to which it reports on any consultations is a matter for the Commission.

Mr. Gow

If the Secretary of State is right, as I believe he is, in saying that the rate of inflation of 1974–75 arose primarily out of the monetary policies of 1972–73, would it not be more honest to the House and to the country to say that the reduction in the rate of inflation is due primarily to the more stringent monetary policies which have been followed since the Government came to office rather than to the TUC and to the sacrifices of the British people?

Mr. Hattersley

I am grateful for the hon. Gentleman's first point, which he makes with great objectivity, and I am sure that the House appreciates it. On his second point, I cannot agree. Every answer that I have given on previous Mondays has pointed out that a number of factors have enabled inflation to be brought under control, and certainly monetary restraint is one. I do not minimise its importance. It has a part to play. It is one of the factors, but over the last two years another major factor has been wage restraint.

Mr. Heffer

Does the Secretary of State agree that the main factor has been the wage restraint of the trade unionists? Does he further agree that wage restraint cannot go on for ever? Trade unionists' earnings must keep up with the cost of living. At the same time, will he indicate to the Opposition that the Price Commission is doing a reasonable job and that it is not a monster but that it could improve its position?

Mr. Hattersley

As my hon. Friend knows, the idea of the Price Commission behaving in a tyrannical way is regarded by both myself and most of industry as ludicrous. There are ways in which the Price Commission can improve its techniques, and perhaps some improvements are possible in the rules by which it operates.

The most important part of my hon. Friend's supplementary question was the reference to wage restraint. I agree that there cannot be a further period in which working people in this country are required to accept a fall in their standards of living. From now on we must make sure that wage increases and increases in the inflation rates are so related that the standard of living improves. If there is a 10 per cent. earnings increase between now and 1st August, and if there is single-figure inflation in a month or two, that will add to the net result which will bring about an improvement in the standard of living.

Mr. Rathbone

Does the right hon. Gentleman agree that there is not a third but rather a second period coming up now, in that the first period, which is looked upon as a period of wage restraint, the £6 a week increase was the largest increase that many workers had ever had, and that far from restraining inflation it added fuel to the fire?

Mr. Hattersley

Phase 1 provided for some lower-paid workers increases greater than they would otherwise have had. Those of us who wanted a phase 3 and regretted that that was not possible in a formal sense regretted it in part because it meant that we could not make proper and special allowance for the lower paid. But to suggest that phase 1 was in itself inflationary is wrong. In phase 1 prices rose faster than wages and there was a net fall in the standard of living, and workers were making a contribution to bringing down inflation.