Inflation (Hansard, 6 December 1979)

§ Sir Geoffrey Howe
The retail prices index rose by 17.2 per cent. in the 12 months to October 1979. The tax and price index, which is probably a better guide to changes in taxpayers' costs over the year, rose by 14.8 per cent. over the same period. The RPI rose by 7.8 per cent in the 12 months up to October 1978.

§ Mr. Rooker
If the rising rate of inflation leads to a further growth in tax avoidance schemes, such as that perpetrated by The Rossminster Group Ltd., will the right hon. and learned Gentleman give an assurance that his hon. and learned Friend the Minister of State will not be put in charge of any crack-down on such schemes, in view of his work for the Rossminster group and others?

§ Mr. William Hamilton
Immorality.

§ Mr. Russell Kerr
What price immorality now?

§ Sir G. Howe
I suppose that I must expect from the hon. Gentleman a question that has nothing to do with the question tabled.

§ Mr. Janner
Does the right hon. and learned Gentleman agree that the main burden of these dangerous inflationary increases is already falling on those who are least able to bear them?

§ Sir G. Howe
The burden of inflationary increases bears harshly on every section of the community, including those who are seeking to work and to stay in employment. That is why we regard the battle against inflation as the central part of the Government's policy. I shall be grateful for the hon. and learned Gentleman's support in that task.

§ Mr. John Townend
To what extent does my right hon. and learned Friend consider that the increases are due to the explosion in public sector pay last 598 winter? To what extent does he feel that the infamous Proffesor Clegg is responsible? Has he any plans to do away with Proffesor Clegg?

§ Sir G. Howe
I know that some of my hon. Friends are anxious to lay a good many things at the door of Professor Clegg, who has probably collected more epithets than most other professors in the past few weeks. I agree with my hon. Friend that one of the factors contributing to the accelerating rate of inflation that we inherited is the way in which the incomes policy adopted by the Labour Government collapsed so manifestly during last winter.

§ Mr. Healey
Does the right hon. and learned Gentleman agree that it is extraordinary if he regards what happened in the last pay round as the collapse of an incomes policy when the Prime Minister has welcomed a 20 per cent. settlement in an industry where productivity has increased by only ½ per cent. in the past 12 months as a triumph for free collective bargaining? Does he continue to claim that the 6 per cent. increase in the RPI that has been generated by his actions since the general election is a once-and for-all increase?

§ Sir G. Howe
The right hon. Gentleman once again seeks to overlook the fact that increases in the RPI resulting from the switch from direct to indirect taxation are once-and-for-all. I do not think that anyone would claim that any settlement of 20peroent. is in line with our much lower rate of growth and productivity. It is my assertion—I hope that the right hon. Gentleman will give the Government his support in this respect—that the attempt to achieve over a prolonged period sustained reductions in the overall level of pay bargaining by means of a constraining statutory or semi-statutory incomes policy has not been seen to be successful. It inevitably results in an explosion of pay settlements of the sort that we have seen in the past 12 months.

§ Mr. Healey
The right hon. and learned Gentleman invited me to agree with him. In fact I disagree totally. These levels of pay increases under the Government, incited by an increase in the cost of living of 6 per cent. that has been generated by their fiscal action, proves that the fatuous idea of the right hon. and 599 learned Gentleman—that if the Government increase the cost of living by 6 per cent. working men will make no attempt to compensate for that—is completely at variance with the whole of experience.

§ Mr. Marland
Question.

§ Sir G. Howe
Distilling, as best I may, a question from a series of observations, I must say that the right hon. Gentleman does little credit to himself and his reputation if he fails to recognise from his own experience the way in which the ending of a period of tight income restraint under an incomes policy inevitably leads to the difficulties of a pay explosion. I should welcome the support that he should be offering to us as a result of his rather battered experience.

§ Mr. Adley
As we have had two supplementary questions from the author of Britain's problems, will my right hon. and learned Friend indicate how long he thinks it will be before his policies begin to overcome the damage done to the nation by the Labour Government?

§ Sir G. Howe
My hon. Friend overrates the importance of the right hon. Member for Leeds, East (Mr. Healey). Although the right hon. Gentleman was the author of a great deal of disaster he should not be regarded as having produced disaster single-handed. As we have said many times, the conquest of our deep-seated economic problems, which in our manifesto we described as the most serious at any time since the war, is bound to take a substantial time. I hope that signs of progress will begin to appear quite shortly.

§ Mr. Norman Atkinson
In view of the right hon. and learned Gentleman's answer about wage bargaining, will he confirm that he is not asking trade unionists to accept a cut in their living standards by negotiating settlements that are less than the rise in the index?

§ Sir G. Howe
I am glad to have the opportunity to address myself to that question. The hon. Gentleman will realise that probably up to 2¾ per cent. of the increase in prices that has taken place in the past 12 months is attributable to the huge increase in oil prices during that period. He must recognise that no Government can protect the pub- 600 lic from the consequences of that sort of increase on their standard of living. The Government do not suggest that pay bargaining should be undertaken with a view to securing protection against this or that increase in the retail prices index. It must be undertaken by reference to the extent to which the employers' organisation can afford a given pay increase. I am very glad indeed to see a much wider acceptance of the reality that is necessary to accept the case for a much wider spread of pay settlements.