Inflation (Hansard, 17 December 1981)

§ 8. Mr. Knox
asked the Chancellor of the Exchequer what is the current rate of inflation.

§ 13. Mr. Parry
asked the Chancellor of the Exchequer, further to his statement of 2 December, when he expects inflation to be reduced to single figures.

§ Sir Geoffrey Howe
The latest figures for the annual rate of increase in the RPI are for the 12 months to October 1981, when the increase was 11.7 per cent. The figures will worsen slightly over the next couple of months, mainly because of the effect of the lower exchange rate on the price of imported raw materials and fuel, but we can expect further progress in reducing the rate of inflation during next year.

§ Mr. Knox
As an advocate of monetarism, how does my right hon. and learned Friend square his forecast of an inflation rate of 10 per cent. over the next 12 months with the very much faster increase in sterling M3 over the past 16 months, especially as he does not envisage a substantial increase in output over the next 12 months?

§ Sir Geoffrey Howe
As my hon. Friend knows, sterling M3 is not the only monetary aggregate to which we pay attention. If I guess rightly, my hon. Friend would be among those more likely to complain about the tightness than the laxity of monetary policy, which is likely itself to produce a continuing fall in inflation.

§ Mr. Parry
In view of the Chancellor's disastrous record over the past two and a half years and his miserable reputation as a Scrooge, will he do us a favour by resigning before Christmas?

§ Sir Geoffrey Howe
I have no intention of doing any such thing. I intend instead to remind the hon. Gentleman that, by comparison with the record of the previous Government, the rate of growth in prices in our first three years in office has in each year been significantly lower.

§ Mr. Richard Wainwright
As the Chancellor always insists on the key importance of the public's inflationary expectations, why did he take measures in his recent public expenditure statement to aggravate the already disappointingly high rate of inflation?

§ Sir Geoffrey Howe
I have taken the action necessary to ensure that the proper resources are available in the national insurance fund to meet the liabilities—largely the increase in pensions—that the fund will have to meet and to ensure that those who can are paying a reasonable contribution to the cost of their housing.

§ Mr. Whitney
Can my right hon. and learned Friend estimate the effect on the rate of inflation of the economic panaceas being peddled by those who do not have the responsibility for dealing with the hard economic realities?

§ Sir Geoffrey Howe
I believe that all those who peddle such panaceas acknowledge that they are likely to have an adverse effect on inflation, but in almost every case they seriously underestimate it.

§ Mr. Robert Sheldon
Leaving aside monetarist claptrap, is not inflation being controlled by high unemployment, which results in low pay settlements? If unemployment falls, as sure as night follows day, pay settlements will increase. How will the Chancellor control inflation then?

§ Sir Geoffrey Howe
In Opposition, as in office, I hope that the right hon. Gentleman will continue to insist on the importance of moderate and sensible pay settlements, instead of looking forward apparently to the development of the opposite. I pay little attention to the rest of his observations. He talks of monetarist claptrap, but throughout his time in office he stressed the importance of a monetary policy, so that indicates the extent to which he cast aside his reputation.