HC Deb 23 November 1978 vol 958 cc1452-4
3. Mr. Skinner

asked the Chancellor of the Exchequer what further measures he has in mind for controlling inflation; and if he will make a statement.

Mr. Healey

I refer my hon. Friend to the statement that I made to the House on 15th November.

Mr. Skinner

Does the Chancellor agree that the increase in MLR is doing nothing to help the Government control inflation—in fact, it will have the opposite effect? Does he not accept that the three-year-old Government policy, as I read it, was to have a strong pound, a strong balance of payments and therefore be able, with strong currency reserves, to withstand short-term fluctuations of market rates from outside? Therefore, why was it necessary, with the balance of payments almost in surplus and with strong currency reserves, to push up MLR instead of fighting off these short-term fluctuations, as was the Government's strategy back in 1976?

Mr. Healey

Private market rates had already risen by 14 per cent. on average since the MLR was fixed at 10 per cent. in June. The increase in market rates was due in part to the increase in American interest rates and in part to uncertainties about inflation in the coming year because of uncertainties on the pay front. I believe that the increase in MLR, which the Government decided a fortnight ago, will help to control the money supply and to keep the monetary aggregates under adequate control in order to ensure that inflation does not rise in the coming year.

Mr. Emery

Will the Chancellor of the Exchequer tell the House, particularly in view of the NUM pay claim which was announced yesterday, what positive action he has taken with the chairmen of the nationalised industries to ensure that they understand what sanctions will be applied against their industries if they settle above the Government's required norm, and how those sanctions will be applied?

Mr. Healey

The hon. Member should know that in the nationalised industries, as throughout the public sector, the Government, as the paymasters and the employers, will ensure that the White Paper guidelines are observed. We succeeded in doing so last year, and questions of that nature do not come well from the Conservative Party in the light of its own history with the mining union.

Mr. Alexander W. Lyon

Will the increase of 30 per cent. in the television licence fee have a marked effect on the cost of living of lower income families and pensioners, and thereby make the effect of inflation on them very much worse?

Mr. Healey

I am not aware of any increase in the cost of the television licence.

Mr. Pardoe

Will the Chancellor accept that any sanctions he might wish to bring against Ford's would be likely to cut off his own nose to spite his face? Is he aware that the only sensible sanction would be a tax surcharge on the Ford employees who have run away with the loot? Does he accept that the President of the United States, in his address to the nation, has now advocated exactly this? In his press conference on the failure of the TUC-Government talks, the Chancellor of the Exchequer said that this was no longer impossible, and that he would like to have a look at it.

Mr. Healey

There are so many things that I want to look at, and this is one of the many. I referred in my speech on that occasion to a very interesting booklet published by the Brookings institute on the use of tax in support of pay policy in which the administrative problems, which I have often described, are very well brought out.

Sir Geoffrey Howe

The Chancellor has referred to rather simpler possible measures which he might have in mind. Does he recollect saying in the statement that he quoted on 15th November that he would contemplate either increasing taxes or cutting public expenditure? Will he tell us which of those he has in mind and where he would intend to cut public expenditure?

Mr. Healey

The obvious answer to that is "No". I made it clear that an increase in taxation or a cut in public expenditure would be an inevitable consequence of a wage explosion, and I see that the general secretary of the TUC accepted this in a speech he made in Leek on Friday of last week. But there is no sign as yet of a wage explosion.