HC Deb 06 November 1980 vol 991 cc1446-9
8. Mr. Parry

asked the Chancellor of the Exchequer what is the current rate of inflation.

The Chief Secretary to the Treasury (Mr. John Biffen)

The retail price index rose 15.9 per cent. in the 12 months to September.

Mr. Parry

Is the right hon. Gentleman aware that when the Chancellor of the Exchequer took charge of the Treasury 18 months ago, inflation was in single figures? When will the rate of inflation be reduced to single figures? Does the Government's strategy for reducing inflation mean control of public sector wages, such as those of railwaymen, firemen, and other public employees? Will such people be the whipping boys for that policy?

Mr. Biffen

When the Government came into office inflation was rising sharply. Inflation is falling——

Mr. Healey


Mr. Biffen

I am not reading. I carry these words in my heart. Inflation is falling, but I do not wish to anticipate when the rate of inflation will reach single figures. The hon. Gentleman will realise that the Government set external financing limits for the nationalised industries and cash limits for local government and central Government expenditure. Those limits give general guidance as to the amounts available for public sector pay.

Mr. Bruce-Gardyne

Does my right hon. Friend recall that the Shadow Chancellor of the Exchequer, the right hon. Member for Leeds, East (Mr. Healey), wrote an article in July, entitled "Why inflation will not fall"? In the light of that forecast and of events since then, will my right hon. Friend be putting any money on the right hon. Gentleman in the current leadership stakes?

Mr. Biffen

The right hon. Gentleman has not merely written to the nation giving his forecast, he has stated in debate that the Treasury forecast of 16+ per cent. inflation by the fourth quarter of this year would be exceeded. He quoted the figure of 20 per cent. On that basis, I shall make no comment. Doubtless Labour Members will draw their own conclusions when they come to make their judgments.

Mr. Healey

As I know that the right hon. Gentleman pays immense respect to his civil servants, may I ask him to confirm the view of Mr. Frank Cassell, given to the Select Committee in July, that inflation would be 5 per cent. higher if the pound were at a level at which British industry could compete with foreign industry?

Mr. Biffen

If the right hon. Gentleman states that Mr. Cassell said those words to the Select Committee, I accept that that is so.

Mr. Kenneth Carlisle

Will my right hon. Friend continue to impress on people that if we want to re-create the confidence necessary for investment and for more jobs, we must continue to hold that fighting inflation is the number one priority?

Mr. Biffen

I shall certainly do my modest best, and I shall start with the levels of public spending.

Mr. Jay

As the Chancellor of the Exchequer has arrayed against his policies the TUC, the CBI, the chairman of ICI, two former Tory Prime Ministers and the Secretary of State for Defence, does he think that he might be wrong?

Mr. Biffen

The more the right hon. Gentleman elaborated that list, the more confidence I gained in my right hon. and learned Friend.

Mr. Peter Bottomley

Will my right hon. Friend accept my congratulations on getting the rate of inflation well below the level predicted by the Opposition Front Bench? Given the remarks made by his right hon. and learned Friend, what average level of pay settlements is compatible with the nation's economy?

Mr. Ellen

I cannot give a reply. To do so would imply a degree of knowledge and judgment in a delicate field of economic affairs, in which Government have intruded dangerously in the past.

Mr. Denzil Davies

Given that this year's public sector borrowing requirement is likely to be about £10.5 billion, and that it might be £14 billion next year, and as the money supply is twice as high as the Government's target, does it not follow that inflation will rise before long? The Government have always maintained that money supply and borrowing requirement affect inflation.

Mr. Biffen

The Industry Act forecast for the public sector borrowing requirement will be published, as is legally required——

Mr. Davies

Dodging the question.

Mr. Biffen

I am abiding by the law. I know that this is difficult for the right hon. Gentleman. The forecast will be published in about a fortnight's time. When that evidence becomes available, we shall have a premise upon which to judge the right hon. Gentleman's prediction.