HC Deb 11 December 1980 vol 995 c1057
5. Mr. Parry

asked the Chancellor of the Exchequer when he expects the inflation rate to return to single figures.

Mr. Biffen

As I indicated in reply to a similar question from the hon. Gentleman on 6 November, inflation is falling, but I do not wish to anticipate when the rate of inflation will, reach single figures.

Mr. Parry

If the Chancellor does not know when he will reduce inflation to the level that he inherited from the Labour Government more than 20 months ago, can the right hon. Gentleman at least explain how he expects employees of the National Health Service and local authorities to accept an increase of 6 per cent. when inflation is more than two and a half times that level and probably will increase next year?

Mr. Biffen

The cash limits for local authorities, which contain a pay factor of 6 per cent., are deemed to be consistent with a prudent public expenditure policy. The hon. Gentleman may like to reflect that there was a time when pay increases of that sort could be secured against a background of much lower inflation.

Mr. Archie Hamilton

Does not my right hon. Friend accept that one of the main factors leading to the lower rate of inflation is the strength of the pound, which has led to cheaper raw materials and other imports?

Mr. Biffen

That is undoubtedly so. In particular, the strength of the pound can be reflected in the wholesale price index, which suggest that the trend in retail prices can be continued in an advantageous direction for some time to come.

Mr. Jay

Cannot the Chancellor justifiably claim one unique record of having inflated the money supply, the borrowing requirement and unemployment all at the same time?

Mr. Biffen

I have no doubt that those three indicators will be in such a relationship that we shall fight the next election in good heart.

Mr. Latham

While the decline in inflation is obviously very welcome, will my right hon. Friend confirm that one of the main factors; still affecting inflation is price increases imposed by nationalised industries, and that we expect those industries to absorb increases as much as they can and not simply pass them on?

Mr. Biffen

I can confirm both parts of my hon. Friend's question.