Economic Growth

HC Deb 24 January 1980 vol 977 cc624-5

4. Mr. Knox

asked the Chancellor of the Exchequer what effect he thinks the absence of economic growth is having on the rate of inflation.

Mr. Biffen

Low productivity has certainly aggravated the problem of inflation. While firm monetary control is essential for the reduction of inflation, improvements in industrial performance would help in this process.

Mr. Knox

Does my right hon. Friend agree that there has been too much emphasis so far n restricting demand and not enough emphasis on increasing supply, which would surely make a greater contribution to reducing inflation?

Mr. Biffen

No, I do not think that that is so. There is much evidence of demand in the United Kingdom that is all too readily supplied by imports rather than home production.

Mr. Healey

Does the right hon. Gentleman accept the statistics published about a week ago by the Central Statistical Office, which reveal an increase in industrial productivity of 11 per cent. in the last two years of the previous Labour Government and a collapse of any productivity increase in the first year of office of the Conservative Government? How does he explain that?

Mr. Biffen

That is a myopic reading of the statistics. Anyone who considers the record of the economy when the right hon. Gentleman was Chancellor will draw the conclusion that it was manifestly mismanaged.

Mr. Budgen

Will my right hon. Friend offer a further explanation of the answer given earlier this afternoon by my right hon. and learned Friend the Chancellor of the Exchequer to the effect that there was more than one cause of inflation? Will he confirm that it is the Treasury's view that there is only one cause of inflation as opposed to the consequences of inflation?

Mr. Biffen

It is the view of my right hon. and learned Friend that monetary factors are the main cause, but there is certainly no question but that there are other ancillary factors that can exacerbate the influence of monetary factors.

Mr. Radice

Does the right hon. and learned Gentleman realise that his anti-inflationary policies amount to little more than old-fashioned deflation?

Mr. Biffen

The breaking of the high degree of inflation that has been experienced in the United Kingdom over recent years will necessitate the sort of harsh measures that could be characterised as deflation but, in truth, they do not merit such an attack because they are dis-inflationary rather than deflationary.