HC Deb 12 June 1978 vol 951 cc636-8
6. Mr. Montgomery

asked the Secretary of State for Prices and Consumer Protection what was the rate of inflation over the last 12 months; and how this compares with the rate of inflation in West Germany.

Mr. Hattersley

The retail price index rose by 7.9 per cent. in the 12 months to April 1978. The rate of inflation in West Germany in the 12 months to April 1978 was 2.9 per cent., a difference of 5 per cent.

Mr. Montgomery

Will the Secretary of State explain why we have done so much worse than the West Germans? Will he admit that, since February 1974, prices in this country have risen by over 90 per cent. compared with about 20 per cent. in West Germany? On that basis, the value of the pound in this country has dropped since February 1974 to 52.3 per cent. If we had had in this country West German rates of inflation, the pound would have been worth 83 per cent. of the earlier figure. Can the right hon. Gentleman explain why the Labour Government have cut the purchasing power of the working man's income by about 30p in the pound?

Mr. Hattersley

I do not know whether the hon. Gentleman has got his figures wrong or whether he has just got them out of perspective. As I told him in my initial answer, the difference between the German inflation rate and the British is 5 per cent. In February 1974, a month the hon. Gentleman chose and one in the last year of the Conservative Government, the differenece between the German inflation rate and the British was even wider. We have narrowed the gap between Germany and Britain during the four years of Labour Government.

Mr. Heffer

Would not my right hon. Friend agree—he might not, because he is a pro-Marketeer—that the situation has developed very badly for us because of our entry into the Common Market, as compared with Germany, which was already in it and which has gained at our expense?

Mr. Hattersley

That is not my interpretation of events, not because I am a pro-Marketeer but because I think that the events are slightly different from those that my hon. Friend described. I share the view of my hon. Friend the Under-Secretary that, if we had not been forced to accept the common agricultural policy in its present form, price increases would not have been as high as they have been over the past four years. I think that no one would argue about that. But that is not the major cause. The major cause is to be found in a number of other more damaging matters, such as the 400 per cent. increase in oil prices.

Mr. Freud

Would not the right hon. Gentleman accept that in West Germany all political parties and industries subscribe to an incomes policy, and that this must be a major reason for the difference in inflation?

Mr. Hattersley

I believe that. I believe that an incomes policy, which I put in its widest sense—I mean not an imposed incomes policy, and certainly not a statutory incomes policy, but a policy which plans the growth in wages—is an essential ingredient of a successful economy. It is one of the things we have achieved over the past three years, and one that I hope we can achieve in the future.

Mr. Kinnock

Will my right hon. Friend tell hon. Members, such as the hon. Member for Altrincham and Sale (Mr. Montgomery), whose economic illiteracy is exceeded only by his dishonest use of statistics, that for a real comparison between the two economies he should take into account West Germany's very low defence expenditure obligations, the fact that it already had a high level of food prices before we even entered the Common Market, and that it has a level of investment renewal that we should do well to emulate? Is it not high time we made changes that would bring us into line, not in the social market economy that the hon. Gentleman wants, but in terms of the reality of our status in the world, so that we can protect the consumer?

Mr. Hattersley

Part of my hon. Friend's supplementary question is essentially not for me but for others. My hon. Friend has highlighted the central theme of all the Questions we have had from the Opposition today, namely, an incredibly selective use of statistics. This is, I fear, a feature of prices Questions. We are about to get it later on, when false comparisons will be drawn with the three-monthly average.