HC Deb 22 March 1979 vol 964 cc1680-2
12. Mr. Neubert

asked the Chancellor of the Exchequer what is the latest annual rate of inflation.

16. Mr. Flannery

asked the Chancellor of the Exchequer what is the current rate of inflation; and if he will make a statement.

18. Mr. Temple-Morris

asked the Chancellor of the Exchequer what is the current rate of inflation.

Mr. Healey

The retail price index rose by 9.6 per cent. in the 12 months up to February 1979. It is essential for the country's economic prospects that we make progress as soon as possible towards reducing the rate to 5 per cent. This will require moderate pay settlements.

Mr. Neubert

With the approach of another general election, will the Chancellor take this opportunity of redeeming his reputation by giving an accurate prediction of the trend of inflation? Does he accept the OECD forecast that in the second half of this year inflation will be running at 12¼ per cent.?

Mr. Healey

I said in answer to an earlier question that the OECD forecast was compiled at a time when the expectation was that earnings would increase this year on the basis of settlements at the sort of level reached after the lorry drivers' strike. All forecasters have revised their figures downwards since then.

Since the hon. Gentleman has raised the sordid and squalid questions of elections, I must tell him that when the Government fought the general election that swept them into office in February 1974 the 12–month inflation rate was 13.2 per cent. and the three-month inflation rate, which the Leader of the Opposition chose to quote in the House the other day, was 17.7 per cent.

Mr. Flannery

Does my hon. Friend remember—and in the annals of inflation it is almost historic—the runaway rate of inflation that we inherited from the previous Tory Government? Will he expatiate a little on that and extend his imagination to the situation that could arise following the massive handouts that a Tory Government would give to their chums if a mental aberration on the part of the electorate ever allowed another Conservative Government to come to power?

Mr. Healey

I fear that if I expatiated and used my imagination you might call me to a halt, Mr. Speaker. I content myself by referring to facts. If the Conservative Party ever comes into power, increased indirect taxes on the scale that it has been mentioning, increased house rents through the abolition of housing subsidies and raised commuter fares caused by the abolition of subsidies to the railway service would produce a rate of inflation that would dwarf even that which we inherited from the last Conservative Government five years ago.

Mr. Temple-Morris

The Chancellor has already mentioned the much-vaunted agreement between the Government and the TUC. Does he agree that an integral and important part of that agreement is that efforts should be made to get inflation down to 5 per cent. within three years? If the Government get on as well with the TUC as they keep telling us, why wait three years?

Mr. Healey

I agree with what the hon. Gentleman said about one of the objectives of our agreement. I said that in my answer. I am discussing with the TUC how we can reach the critical path to that commonly desired objective.

Mr. Stoddart

Bearing in mind the direction of inflation and the desirability of getting it down to 5 per cent., can my right hon. Friend give an assurance that in his forthcoming Budget he will not put on any extra expenditure taxes which will affect the prices index?

Mr. Healey

I fear that if I gave such an assurance at this time, I might be drummed out of the Brownies.

Sir Geoffrey Howe

Does the Chancellor recollect that the fashion for using the three-monthly inflation rate was set not by by my right hon. Friend the Leader of the Opposition but by himself at the time of the election in October 1974, when he and the Government just crept into power? Does he recollect that that was when he gave his notorious forecast that the inflation rate would be 8.4 per cent.? Does he accept that, on the same basis, the inflation rate is now running at 13.3 per cent? Is that not a disgraceful situation?

Mr. Healey

The right hon. and learned Gentleman is wrong again. There has been more sloppy homework by his researchers. The 8.4 per cent. figure was not a forecast. It was a statement of the three-monthly inflation rate. I confess that I was a little surprised when the Leader of the Opposition, after attacking for five years the use of a three-monthly inflation rate, chose to resurrect it on Tuesday.