HC Deb 22 October 1979 vol 972 cc13-7
10. Mr. Neubert

asked the Secretary of State for Trade what estimate he has made of the effects on the retail price index of the price increases already in the pipeline at the time when he took office.

12. Mr. Mates

asked the Secretary of State for Trade what has been the effect on the current retail price index of the price increases which were in the pipeline when he took office.

17. Mr. John Garrett

asked the Secretary of State for Trade what is his latest estimate of the effect on the retail price index of the June 1979 Budget measures.

28. Mr. O'Halloran

asked the Secretary of State for Trade by what percentage the increase in value added tax has raised retail prices since the June Budget.

Mr. Nott

With the exception of the switch to VAT, which accounts for 3½ per cent. on the RPI, and other budget changes, which account for a further ½ per cent., all of which have been wholly offset by substantial income tax reductions, virtually every other price increase reflected in the latest RPI was already in the pipeline when the Labour Government was rejected by the electorate in May.

Mr. Neubert

Does not my right hon. Friend agree that his answer exposes the bogus character of the Opposition's protest on prices? Will he confirm that inflation, as an annual rate, has risen each month for the last 12 months and that the rising trend is attributable entirely to the previous Government's policies?

Mr. Nott

Inflation was already in double figures when we became the Government, and factory-gate prices have been rising during the year. Under the previous Administration the value of the pound was halved, unemployment was doubled and the national debt was nearly doubled. One would have imagined that the Leader of the Opposition would have kept in his seat during this Question Time.

Mr. Speaker

I propose to call first those hon. Members whose questions have been answered.

Mr. Joel Barnett

The previous Chancellor of the Exchequer stated that if earnings rose by more than 15 per cent. prices would inevitably rise. Does the right hon. Gentleman agree with that statement?

Mr. Nott

I agree entirely with the former Chancellor's forecast that, where wage increases of 15 per cent. were achieved in the former year, the RPI would increase by 13 per cent. In addition to that, there are the 4 per cent. increases resulting from the Budget changes which, as I have said, have been more than offset by income tax reduction.

Mr. Higgins

Does the Secretary of State agree that it is even more extraordinary that the Leader of the Opposition should have intervened when the present rate of inflation is less than two-thirds of the maximum rate that was achieved under the previous Government? Does he also agree that it is important to stress the way in which the change from direct to indirect taxation both increases incentives and helps the balance of payments because VAT is zero-rated?

Mr. Nott

Certainly that change increases incentives and provides more personal choice. It is worth reminding the House that in the first Budget of the previous Government not only did their increase in indirect taxation add 3¾ per cent. to the RPI but income tax was increased by 3p. In their second Budget they added 2½ per cent. to the RPI and increased income tax by a further 2p. The memory of those actions will not be forgotten by the British people and certainly not by the House.

Mr. Robert Hughes

The Minister has just claimed that all but 4 per cent. of the RPI increase was already in the pipeline by the time his party took office. Therefore, it should be simple for him to forecast when those prices in the pipeline will come out. Will the Minister now tell us when the RPI will stabilise and return to single figures?

Mr. Nott

As I have already said, it will take time—[HON. MEMBERS: "How long?"]—to correct the deterioration that has been caused by five years of Socialist incompetence and mismanagement. I remind the hon. Gentleman that his party was in power, and that is one of the reasons why the country has been in such a dreadful state, for most of the past 15 years.

Mr. Garel-Jones

Does my right hon. Friend agree that, in the light of comments made by my right hon. and hon. Friends, the best advice that could be given to the Labour Party is contained in the lines of Alexander Pope: Let such teach others who themselves excel. And censure freely who have written well.

Mr. Nott

I am delighted that a poet has joined my right hon. and hon. Friends. I hope that we shall hear more quotations from Alexander Pope in the future.

Mr. Robert Sheldon

In answering questions about the retail price index, the right hon. Gentleman has not mentioned the tax and prices index once. Is that because he is as contemptuous of it as is the rest of the House?

Mr. Nott

The tax and prices index has risen by 14.1 per cent. according to the last figures and it has been a useful addition to our statistical armoury. [Interruption.] It is fascinating to have a Question Time in which the Leader of the Opposition and two former Treasury Ministers have taken part. In due course, I shall be quoting from articles by former Treasury Ministers in The Guardian and other newspapers. Those articles have been most enlightening for all of us.

Mr. Emery

Does the Secretary of State agree that the party points that the Opposition are trying to score have little relevance outside the House? The message that should be going to the country from both sides of the House is that the only way to get inflation down is by improving productivity and increasing production from the whole of British industry.

Mr. Nott

I agree entirely with my hon. Friend. The key objectives which we have to meet in our economic policies are, first, to bring back a climate of incentive into our society and, secondly, to create room within the total resources generated by the economy for the wealth-creating and investing private sector which produces more jobs and more wealth. That has not been the case in the last five years.

Mr. Clinton Davis

Does the right hon. Gentleman agree that something we might have heard from him is a little more frankness about his position and that of his right hon. and hon. Friends during the last election? What promises did he make about an increase in VAT during his election campaign?

Mr. Nott

I had a most delightful little campaign in West Cornwall. I enjoyed it very much and, like most of my hon. Friends, I nearly trebled my majority. I do not recall making any forecasts about VAT. My constituents are more interested in other things.