HC Deb 30 July 1981 vol 9 cc1153-4
9. Mr. Thomas Cox

asked the Chancellor of the Exchequer what was the rate of inflation on 1 July.

Sir Geoffrey Howe

Movements in the retail prices index are calculated from the middle of each month. The latest figure available is that for mid-June, when the increase over the previous 12 months was 11.3 per cent.

Mr. Cox

I note what the right hon. and learned Gentleman says. Is he aware that we are again on the prices increase spiral? Why should working people accept lower wage increases when all round them they see the prices of the essential commodities of life—gas, electricity and rents—being increased and the Government doing nothing to impose any control? When will the standard of living of working people be increased under this Government?

Sir Geoffrey Howe

The rate of inflation has fallen substantially from what it was 12 months ago. It is true that the reduction has taken place more dramatically in those areas where prices compete in the high street than in those provided by the nationalised industries. The hon. Gentleman cannot expect this Government—indeed, any Government—to guarantee rising living standards for people generally until we improve our economic performance, and a crucial part of that performance depends on lower pay settlements if employment is to increase again.

Mr. Forman

Is it not essential that the economic revival, when it comes, should be based on much lower rates of inflation? Is it not equally essential that those lower rates of inflation should be achieved by some sort of pay policy? Will my right hon. and learned Friend look again at the possibility of a six-month wages freeze from this autumn?

Sir Geoffrey Howe

I confess that having been directly responsible for the implementation of the six-month wages freeze by the previous Conservative Government, and having observed the experience of the Labour Government when they tried a similar policy, I have no confidence that an institutionalised incomes policy is the right answer to our problems. That does not mean that I underestimate the importance of continued progress towards more sensible, lower, general average pay settlements. Nothing could do more to reduce the danger of unemployment and improve the economy's general prospects than more sense in that respect. In that sense I welcome my hon. Friend's comments, but in no other.

Mr. Ennals

Based on the Treasury forecast, the Secretary of State for Social Services estimated that there would be a 10 per cent. inflation rate in November. That is the basis of the uprating. Does the Chancellor of the Exchequer believe that, with all the signs that the inflation rate will go up, there can be a 10 per cent. inflation rate, based either on the RPI or on the retail and taxes index, by November this year?

Sir Geoffrey Howe

That forecast still stands. It is far too early to conclude that it will be impossible to achieve it. The right hon. Gentleman might remember that the inflation forecast last year was significantly too gloomy. I see no reason to make any change at this stage.

Sir William Clark

Does my right hon. and learned Friend agree that the Government's policy for reducing inflation has been highly successful? Does he further agree that private and public sector prices make up the 11.3 per cent. inflation rate but that in the private sector the increase is about 6 per cent. whereas in the public sector it is about 18 per cent? Does that not mean that we should try to accelerate privatisation? Must we wait for market conditions to be right? Why can we not issue convertible loan stock?

Sir Geoffrey Howe

That concerns a much wider range of possibilities. I agree that probably the central, single most important problem for our economy is the extent to which its performance is inhibited by the dominance of publicly owned monopolies face to face in many cases with monopolistic trade unions. That makes every possible case for proceeding with privatisation as far and as fast as we sensibly can, as my hon. Friend suggests.