PRIME MINISTER (ENGAGEMENTS) (Hansard, 8 June 1978)

§ The Prime Minister
This morning I presided at a meeting of the Cabinet. I also bade farewell to the Prime Minister of India on his departure for Washington. In addition to my duties in this House, I shall be holding further meetings with ministerial colleagues and others.

§ Mr. Neubert
Has the Prime Minister seen the Chancellor's Written Answer to me in today's Hansard, which shows that, within nine months of the statement that inflation was at 8.4 per cent., it was six times higher than that, that in only nine months of this Government has inflation been, on that basis, less than 8.4 per cent., and that it is now already in double figures, at 11.2 per cent? Will the right hon. Gentleman now retract the statement that he made last Tuesday and admit that much the same would be likely under another Labour Government?

§ The Prime Minister
On the last point, I should not like to retract what I said last Tuesday; I should prefer to emphasise it, and to say that it is necessary to maintain the conditions under which a single-figure inflation rate can be maintained. However, I outlined the necessity for doing this because of our competitive position and I outlined the factors which would be necessary. I said that some were fiscal, some were monetary—we have taken action today on monetary levels to keep those figures down—and that the third group of factors related to wage settlements.
I must make it clear that our people have had great benefits this year from 365 the moderation in wage settlements over last year. They are higher than I wanted. We wanted no more than 10 per cent., and it looks as though the rate will be above that. Next year, if we get a lower figure than we have had this year—I hope that it will be a substantially lower figure—the people of this country will get a greater benefit than they would from double-figure wage settlements. That is what I am going for.

§ Mr. Stoddart
If he has time today, will my right hon. Friend make it clear to the British public that if the mortgage lending rate goes up tomorrow it will be as a direct consequence of the attitude and actions of the Opposition in upsetting the Chancellor's balanced Budget? Will he also make it clear that if the mortgage rate rises by 1 per cent., people will have lost more as a result of the Opposition's tactics than they will have gained from the 1p reduction in the standard rate of income tax?

§ The Prime Minister
Mortgage interest rates must, I think, reflect the capacity of the building societies to attract savings. If their rates are out of line, in accordance with the policy which this Government intend to follow we do not intend to massage them to get a result which would be misleading and deceptive. I said at the beginning—I have gone on on this basis—that we would act to preserve the best interests of our people. As for the Opposition, it is true that the right hon. and learned Member for Surrey, East (Sir G. Howe) has suggested that there should be an increase. I do not criticise him unduly for that, but if we get these rates in agreement again we shall, I believe, see a period of declining rates, providing that we can keep inflation down. That seems to me the right approach.

§ Sir G. Howe
If today's crisis measures are said to be a consequence of the tax cuts imposed by the House of Commons on this Government, why is it that minimum lending rate had to be increased after the date of the Budget and before the tax cuts were introduced, by 2¼ per cent.? Was that not a consequence of the Government's deliberate and reckless decision to increase public spending by £4,000 million earlier in the year? Will the Prime Minister tell the House by how much today's crisis measures will 366 increase unemployment and by how much they will increase the cost of living? Will he not acknowlege that today's fourteenth —unannounced—Budget from this Government is the final proof of the incompetence of the Chancellor of the Exchequer?

§ The Prime Minister
I think that what the Opposition are irritated about is the fact that we have not got a crisis on our hands. The Opposition may have a crisis, but the country has not. The Government are acting in all of these ways to ensure that there is a steady economic policy, by putting right what the Opposition did in their sheer, reckless irresponsibility. As for unemployment, we should give the Opposition credit, to this extent: because of the reduction in taxation, their measures would have had the effect of reducing unemployment below what it would otherwise have been, because of the increased consumption. What the national insurance surcharge will probably do, as far as we can estimate, is to put unemployment back to where it was, in other words, to offset that. It cannot be calculated, but the net effect is probably very little, with one offset against the other.