HC Deb 11 December 1980 vol 995 cc1060-2
10. Mr. Marlow

asked the Chancellor of the Exchequer what has been the annualised rate of inflation based on the last four months.

Mr. Biffen

The increase in the retail price index over the four months to October was 7.2 per cent. on an annualised basis.

Mr. Marlow

Will my right hon. Friend accept that that is very encouraging news, as it is well below the rate of inflation? Bearing in mind that the right hon. Member for Leeds, East (Mr. Healey), on the basis of three months, talked about a rate of inflation some years ago of 9 per cent., will my right hon. Friend accept that the House is massively impressed by the success of a major plank of the Government's economic policy?

Mr. Biffen

My hon. Friend is right to be encouraged, but I hope that he will recollect that there were certain reservations about the statistical techniques of the right hon. Member for Leeds, East (Mr. Healey)—although I must say that we are learning to miss him already. Therefore, I hope that we would try to avoid taking three months' figures and annualising them as a means of talking about rates of inflation.

Mr. Cook

When the Chief Secretary looks at the figures over the past 12 months, will he acknowledge that the public sector component of the RPI has risen at a level of 25 per cent., nearly double the level for the private sector, as a direct consequence of his policy in public expenditure? Will he grasp the fact that it flies in the face of reason to argue that cuts in public expenditure cut inflation when they are achieved by putting rents up by 30 per cent., electricity by 33 per cent. and rail fares by 38 per cent.?

Mr. Biffen

The point that the hon. Gentleman makes is not unlike that made earlier by my hon. Friend the Member for Melton (Mr. Latham). The reason why there has been such a sharp rise in those component parts of the retail price index is that we inherited nationalised industries whose finances had been plundered in the pre-election period by the previous Government.

Mr. Dorrell

I welcome the recent fall in the rate of inflation, but can my right hon. Friend tell the House what steps he intends to take to ensure that the revival of demand that the Government expect next year is not preempted by inflation, as has happened so many times in the past?

Mr. Biffen

The prudent pursuit of fiscal and monetary policies.

Mr. Meacher

If the Chief Secretary is predicting a major economic U-turn by the Government, do they still believe that there is much connection between the money supply and the rate of inflation? If so, what is his estimate of the rate of inflation in about two years' time, with sterling M3 now escalating at 20 per cent. a year?

Mr. Biffen

In respect of the first and more tantalising part of the hon. Gentleman's question, despite the unquestioned reputation of the author of the article in The Guardian today I must tell the House that it does not accurately reflect the speech that I gave to a private meeting of the Conservative Party finance committee—and I have the modest advantage of having been there. As far as the second part of the question is concerned, those who like myself, have been deeply committed to the policy of the Government have always been extremely chary of trying to make mechanical relationships between money supply and rates of inflation. We have stated our cautionary position from the very outset.

Mr. Shore

Is the Chief Secretary aware that the whole House will accept what he says — that the words reported in The Guardian were not the words that he used at that meeting of Back Benchers last night? However, in view of the great interest that there is—properly—bound to be in what he said, will he tell us what he did say about monetary supply targets?

Mr. Biffen

I believe that what I said was of sufficient moment not to be contained in a mere answer to a question. Since the right hon. Gentleman now sits in the distinguished position that he does, I look forward to many months of economic debate with him, when all the issues will be debated and measured in a proper forum.