HC Deb 05 March 1979 vol 963 cc890-6
12. Mr. Peter Morrison

asked the Secretary of State for Prices and Consumer Protection what has been the increase in food prices since February 1974.

Mr. Maclennan

In mid-January the food price index had increased by 115.6 per cent. since 1974.

Mr. Morrison

Will the Minister say, in view of that very substantial increase in the cost of food over the past five years, what his estimates are for the increased cost of food over the next 12 months?

Mr. Maclennan

All predictions of that kind are fraught with considerable difficulties. That is especially so in the case of food. The price of fresh food, as has been demonstrated by the events of January, is extremely subject to fluctuations due to weather. Seasonal foods vary very much in price from year to year. A very large part of the recent increase has been due to the quite exceptional rise in the price of vegetables.

Mr. Hardy

Although my hon. Friend is reluctant to offer any prediction, has he made any study of Conservative Party policy, such as it is? If so, does he agree that the implications of its policy are that food prices would rise enormously in a matter of months if Britain had the misfortune to have to endure one of its Administrations?

Mr. Maclennan

The policy of the Conservative Party on food prices appears to be characterised by a completely unbalanced view that the green pound should be devalued as soon as possible, with all the disadvantages for the economy at large which would flow from that. The Opposition seem not to recognise the damage which would flow from any such sudden jump. The Government's policy is a balanced one bearing in mind both the needs of the producers and the pressures to which consumers are subject.

Mr. Ridsdale

Does the Minister agree with the head of the Economic Commission that one of the chief reasons for the increase in the price of food has been the vast increase in transport costs?

Mr. Maclennan

It is true that the cost of distribution is a major part of the end price paid by the consumer in the shop. A number of studies have been carried out by the Price Commission into the distribution of meat and fish especially. If the hon. Member has in mind a specific problem, perhaps he will draw it to the attention of my right hon. Friend.

Mr. Grocott

Can my hon. Friend confirm that the view of the Conservative Party is identical with that of the National Farmers' Union on all food matters in that it calls for the complete devaluation of the green pound to bring our prices into line with those of other EEC countries? Will my hon. Friend also confirm that it is the Government's resolute determination to support completely the stance of my right hon. Friend the Minister of Agriculture, Fisheries and Food in this year's price round negotiations, whatever the effect it has on our relationships with the other eight nations?

Mr. Maclennan

I have noticed that the farming press, which normally speaks with some favour of the Conservative Party, has not spoken with favour of its agricultural policy and indeed on more than one occasion has drawn attention to its absence. But I agree that my right hon. Friend is right to continue the policy which has been the policy of the Government over the past few years to seek balanced alterations in the green currency rate at the appropriate moments. I note what Mr. Richard Butler is reported to have said today. I do not know whether the Opposition are calling for a 15 per cent. devaluation of the green pound, as he has, but the cost consequences for the housewife will have been noted.

Mr. Giles Shaw

Reverting to the supplementary question asked by the hon. Member for Rother Valley (Mr. Hardy), is the Minister aware that the Conservatives' price proposals on agricultural produce to move to common prices would result in a price increase of about 1 per cent. over five years? Bearing in mind what the Government have done with regard to VAT on food, which put up the food index by 4 per cent. at a stroke, who is the housewife's better friend?

Mr. Maclennan

The hon. Gentleman is wholly wrong. The effect of eliminating MCAs in the way that he has described would be to put up food prices by about 6 per cent. at a stroke. That is something that no responsible Government could contemplate. Although the needs of the farming community are very much borne in mind by the Government, and have been demonstrated on a number of occasions, it is not possible to insulate the farming community wholly from our rate of inflation compared with that of the Community at large. We cannot hope to achieve common price levels until we have eliminated these disparities in our inflation levels. It is high time that the Conservative Opposition recognised that.

13. Mr. Nicholas Winterton

asked the Secretary of State for Prices and Consumer Protection what is the increase in the retail price index, exclusive of seasonal foods, over the last six months, expressed at an annual rate.

3. Mr. Cormack

asked the Secretary of State for Prices and Consumer Protection what is the average annual rate of increase in the retail price index since February 1974.

16. Mr. Tim Smith

asked the Secretary of State for Prices and Consumer Protection how much the retail price index has risen since February 1974.

17. Mr. Aitken

asked the Secretary of State for Prices and Consumer Protection what is the increase in the retail price index, excluding seasonal foods, over the last six months.

18. Mr. Temple-Morris

asked the Secretary of State for Prices and Consumer Protection what is the latest year-on-year figure for the percentage increase in the retail price index.

22. Mr. Newton

asked the Secretary of State for Prices and Consumer Protection what has been the percentage increase in the retail price index over the past 12 months.

Mr. Hattersley

The retail price index has risen at an average annual rate of 15.6 per cent. since February 1974, giving a cumulative increase of 103.7 per cent. The increase over the last 12 months has been 9.3 per cent. The index, excluding seasonal foods, has risen by 4.3 per cent. over the last six months, which is equivalent to an annual rate of 8.8 per cent.

Several Hon. Members rose—

Mr. Speaker

Order. I propose to call first those six hon. Members whose questions are being answered.

Mr. Winterton

I am grateful to the Secretary of State for that information. Since the Government consider this index the most reliable index with regard to inflation, will he now concede that the Government's claim to be able to maintain single figure inflation throughout this election year is now, unfortunately, entirely bogus? Does he not accept that one way to keep down inflation is to encourage industry? Does he not agree that through various measures which the Government have introduced they have produced disincentives for industry which could make such a contribution to main- taining a low figure of inflation in this country?

Mr. Hattersley

No. I believe that it is still possible to maintain the inflation rate, as measured by the RPI, at or about its present level. I share the hon. Gentleman's view that the RPI is the best measure of inflation, which is why I did not draw attention to the final sentence of my answer, which shows that what is popularly called "the underlying rate is falling. I have stuck to the RPI in good times and bad. I have not chosen my index to demonstrate the best figure. I still believe in the RPI, and I believe also that it is possible, so long as the nation as a whole behaves sensibly, to keep inflation at or about its present figure.

Mr. Cormack

Will the Secretary of State tell us how this 103 per cent. compares with the predictions that he and the Chancellor of the Exchequer made during the general elections of 1974? Can he also tell the House which British Government in history have had a worse record than this one on this front?

Mr. Hattersley

The elections of 1974 were characterised by an argument concerning how inflation had been created. I share the view—I repeat it—that that was in part expressed by the hon. Gentleman who wrote "The End to Promises" that many of the causes of inflation in 1974–75 were established well before this Government came to power. The important achievement is that over the last two years we have cut the inflation rate by more than half. I believe that we can keep it at or about its present level, and we must struggle to do so.

Mr. Smith

Is not the increase in me retail price increase since February 1974—to use the Secretary of State's own words—uniquely bad? How much worse is it than the increase under any previous British Government this century?

Mr. Hattersley

This is the only British Government this century who came to power facing an increase of 400 per cent. in oil prices, a money supply that was wholly out of control, a public sector borrowing requirement that was expanding and industry that was rent by the divisions caused by the previous Government's industrial policy. For two years we overcame those difficulties, and since then we have managed to reduce the rate of inflation. That is a fact with regard to the last five years.

Mr. Temple-Morris

Modest man that he is, does the Secretary of State agree that since his Government came into office the pound has halved in value, or, to put it another way, that the cost of living has doubled? Modest man that he is, will he admit to any responsibility at all lying with this Government, and, if so, what responsibility?

Mr. Hattersley

I have repeated this many times, and I shall repeat it again if it pleases the hon. Gentleman. I suppose that in 1974–75 we could have moved more quickly to remedy the errors of our predecessors. We could have attempted more quickly to get the money supply and the public sector borrowing requirement under control. Perhaps we did not clean up the mess sufficiently quickly, but that is the full extent of our responsibility.

Mr. Madden

Can my right hon. Friend say what effect increasing television licences has had on the index? Does he favour abolishing the licence and raising the necessary revenue for the BBC from the Exchequer?

Mr. Hattersley

I cannot give my hon. Friend the precise figure for which he asks, although it would be in points of decimals. As he knows, the second part of his question is a matter not for me but for my right hon. Friend the Home Secretary.

Mr. Neubert

Would it not be more precise for the Secretary of State to admit that the time for alibis is over and that our record in the last five years, in comparison with other countries, is abysmal, and that even in January our inflation rate was higher than in any other country in the Common Market? Are not higher prices the inevitable consequence of a Socialist Government?

Mr. Hattersley

The hon. Gentleman struggles to make his little political point. I must repeat the facts of the matter to him. We reduced inflation from over 20 per cent. to little more than 8 per cent.

Sir John Langford-Holt

To 8.4 per cent.

Mr. Hattersley

Exactly, 8.4 per cent. to be precise, if the hon. Gentleman wants to remind us of that figure. We can maintain inflation at the present level, but one thing that would stop our maintaining it at that level would be the inducing of fear in the British people in general and the trade union movement in particular that since inflation is bound to get out of hand they must make pre-emptive wage demands to compensate for the anticipated rises. So long as the Conservative Opposition continue to pretend that inflation will again take off, I believe that they are making it more likely. We propose to tell the truth about inflation, which is that there is a good prospect of its remaining at or about its present level.

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