HC Deb 26 June 1980 vol 987 cc721-3
3. Mr. Skinner

asked the Chancellor of the Exchequer what further steps he is taking with a view to reducing inflation; and if he will make a statement.

4. Mr. Maclennan

asked the Chancellor of the Exchequer if he will make a statement on the development of his policies to reduce inflation.

The Chancellor of the Exchequer (Sir Geoffrey Howe)

The Government's counter-inflationary strategy was set out in my Budget speech and in the medium term financial strategy.

Mr. Skinner

Does the Chancellor of the Exchequer recall being interviewed by Mary Goldring on the "Analysis" programme a few weeks ago? Does he recall saying that he would like to see a massive business portfolio abroad in order that Britain can be great again as it was in the 1930s? Does he remember that he was asked whether that might result in 3 million people being unemployed? Will he tell the House what he told the people on the air—that he would not regard that as unwelcome and that the money would have to be found from North Sea oil? [HON. MEMBERS: "Too long."] Is he aware that the arithmetic shows that not enough is coming from petroleum revenue tax to pay for 3 million unemployed?

Sir G. Howe

There is no point of contact whatsoever between the purported summary in the hon. Gentleman's question and anything that I have said in the past. I cannot imagine where he gets his ideas from.

Mr. Bruce-Gardyne

Has my right hon. and learned Friend noticed the results of the latest CBI survey on manufacturing industry's intentions which suggest that manufacturers expect to put up prices less than at any time in the past seven years?

Sir G. Howe

I have noticed the fact to which my hon. Friend draws attention. House prices are standing steady and have been so for some months. That is among several indicators that the rate of inflation is likely to turn down fairly shortly.

Mr. Healey

Does the Chancellor agree that the rate of inflation has more than doubled since he took office? Does he accept that that represents not only a total failure of the policies to which he has referred, but a betrayal of all the promises made during the last general election? Now that the Treasury is forecasting inflation at between 18 and 19 per cent. at the end of the year, will he raise the increase for the old-age pensioners in November by 10 per cent. to fulfil his legal commitment to keep the rise in pensions in line with the rise in prices?

Sir G. Howe

The right hon. Gentleman should know better than to found his assessments of Treasury forecasts on articles in the newspapers. The Treasury's last forecast was contained in the record published at the time of the Budget. The right hon. Gentleman will know, because he talked about it often enough himself, that the rate of monetary growth between the middle of 1977 and the middle of last year was 15 per cent. per annum, and that that is the fundamental cause of the current inflation.

Mr. Healey

Does not the right hon. and learned Gentleman accept the figures in his Red Book which show that the increase in money supply in the year before he took office was a good deal lower than the increase which occurred in his first year of office? Will he answer the central question? Will he undertake to raise the old-age pension in November in line with the increase in prices by that time and not cheat pensioners again, as he has already cheated them out of £30 million by paying the pension increase two weeks' late?

Sir G. Howe

The right hon. Gentleman is expert in these matters because the Government of whom he was a member reversed the basis of assessment of pension increases and thereby laid themselves open to the charge of cheating the pensioners. This Government will not cheat the pensioners.

Mr. Alan Clark

In considering the development of his policies against inflation, will my right hon. and learned Friend reject totally any concept of interfering with wage levels? Will he recognise that a man's power to get the market rate for his labour is one of the primary freedoms with which the Conservative Party is associated?

Sir G. Howe

I recognise, as the majority of hon. Members on both sides of the House recognise, that previous attempts to introduce pay policies which are applied across the board, whether by statute or otherwise, have always contained the seeds of their own destruction. Of course the Government are responsible for determining the pay of people in their employ, but that is an entirely different matter.

Mr. Arthur Lewis

Will the Chancellor of the Exchequer explain how his policy, which appears to be working since unemployment is increasing, also seems to be increasing inflation? Is his policy to increase unemployment and inflation, because that is what has been happening for the last 12 months?

Sir G. Howe

No. I am sure that the hon. Gentleman understands that so long as monetary discipline is maintained, as it will be, pay settlements which go beyond the underlying rate of the money supply and beyond the growth of the country's productive resources, are bound to add to the level of unemployment. The power to influence that level rests a great deal in the hands of people who conduct pay bargaining.