Inflation (Hansard, 5 March 1979)

§ 9. Mr. Michael Morris
asked the Secretary of State for Prices and Consumer Protection what are his forecasts for price inflation, as measured by the retail price index, in the coming year.

§ 14. Mr. Montgomery
asked the Secretary of State for Prices and Consumer Protection what estimate he has made of the likely trends in the retail price index up to the end of 1979.

§ 19. Mr. Shersby
asked the Secretary of State for Prices and Consumer Protection what is his current forecast of the date on which the 12-month rate of increase in retail prices will rise above 10 per cent.

§ Mr. Hattersley
The Government's short-term economic forecast was published on 15 November 1978. Such forecasts are of course conditional upon a number of financial and economic factors—not least the growth of earnings.

§ Mr. Morris
I am grateful for that answer, but is the right hon. Gentleman aware that I ask that question now because there have been a number of changes in the economy since that forecast was made? It is most disappointing not to be able to receive a specific answer. May I ask the right hon. Gentleman now to give me a specific figure of the latest forecast increase in relation to this question?

§ Mr. Hattersley
As the hon. Gentleman must know, it is not possible to give a precise estimate of the sort that he wants, although, as part of the Budget, the obligations placed upon my right hon. Friend the Chancellor of the Exchequer to publish a forecast will mean that a more up-to-date figure is provided. All that I can tell the hon. Gentleman—and I hope that he and the country will believe this—is that it remains possible that we can keep inflation at or about its present level. But that requires the wholehearted cooperation of industry as a whole, the British trade union movement and all those who contribute to the causes of increased inflation or stable inflation.

§ Mr. Montgomery
How does the Secretary of State explain the fact that in Abertillery on 28 November 1978 he said that it was possible to forecast five to six months ahead because of factors that were known to his Department? Is not his newfound modesty largely due to the fact that he knows all too well that inflation will be back in double figures before very long?

§ Mr. Hattersley
The hon. Gentleman was one of those who at the time of the Abertillery forecast announced that I could not make predictions with such accuracy. In fact, what I said then turned out to be exactly right. We achieved single figures in the early months of last year and we remained at or about that figure for the following year. What was different then from now is very clear. The overall level of earnings is not easy to predict and is not easy to determine. If it remains at the reasonable level advocated by the Government we can have another good year of inflation outturn. If not, inflation may well accelerate again. What I am reminding the House of today is the importance of holding down those costs that might accelerate the retail price index. I hope that Opposition Members will support us in making that point.

§ Mr. Litterick
Can my right hon. Friend tell the House the extent to which the no doubt approximate estimate of future price increases is attributable, first, to wage increases; secondly, to factors external to the British economy; and, thirdly and very important, to those factors that are directly under the Government's control?

§ Mr. Hattersley
Of course, there are some external factors. My hon. Friend would not expect me to pretend otherwise. The potential increased cost of imported oil is an obvious example. But I must tell my hon. Friend this about the other two categories. Those factors that can be determined by the Government—the control of the money supply and the limit on the expansion of the public sector borrowing requirement—have been moving in the right direction for the past two years. In all those particulars the Government have acted in a way consistent with our inflation targets. That leaves wage costs, which are a substantial contribution to every price increase. For the rest of the year they will determine our inflation by the end of 1979 and the early months of 1980.

§ Mr. Rost
The Secretary of State is very good at blaming the Government's appalling record of rising prices on everybody else and everything else, particularly wage costs. Will he now tell us what proportion of the increased inflation that is expected is due to the Government's inability to control their own spending to 887 keep it within what they are prepared to raise in taxation?

§ Mr. Hattersley
I said a moment ago, and I repeat, that the Government have a better record over the public sector borrowing requirement, domestic credit expansion and the money supply than our predecessors. If the hon. Gentleman has any doubts about that, I suggest that he reads "An End To Promises" written by one of his hon. Friends, who described the problems faced by the previous Government in the dying days of that Administration in terms that I have used to describe them at previous Question Times.

§ Mrs. Sally Oppenheim
How can the Secretary of State reconcile the fact that the trend in inflation has been rising steadily for the past three months, at least since last November, with his own optimistic statements in June and November last year to the effect that 1979 would be another successful year in terms of containing inflation? As he appears to be having some difficulty in making long-term forecasts, may I offer him the services of Conservative research department statisticians to explain to him why my forecasts of last year are proving right and his are proving wrong?

§ Mr. Hattersley
I take it that those are the same statisticians as urged the Leader of the Opposition to talk about nine months in single figures four months too late. But, putting that aside, knowing the hon. Lady to be an assiduous student of all my speeches, I always look, on the morning of my Question Time, to see what predictions I have made in the recent past. The predictions I made during the months to which she referred are boringly identical with what I have said today, namely, that inflation during the early part of 1979 was a matter for the British nation as a whole to decide that high wages would produce high inflation rates and vice versa. That is what I said then, and that is what I repeat now.

§ Mrs. Oppenheim
On a point of order, Mr. Speaker. I should like to provide you with examples of quotations from speeches by the Secretary of State—

§ Mr. Speaker
Order. I read speeches by right hon. and hon. Members on both sides of the House and keep my opinions to myself.