Inflation (Hansard, 26 March 1981)

§ 13. Mr. Knox
asked the Chancellor of the Exchequer what has been the rate of inflation in the most recent 12-month period for which figures are available; and what was the comparable figure for the 12-month period up to May 1980.

§ Mr. Brittan
The retail prices index increased by 12.5 per cent. in the 12 months to February 1981, and by 21.9 per cent. in the 12 months to May 1980.

§ Mr. Knox
Does my right hon. and learned Friend agree that that considerable reduction in the rate of inflation, which in itself is welcome, is the consequence of adopting policies of deflation and has nothing to do with monetarism?

§ Mr. Brittan
No.

§ Mr. Hooley
As the Government claim that inflation is a key factor in unemployment and that the rate of inflation will come down drastically in the next couple of years, why does the Chancellor of the Exchequer's White Paper forecast unemployment at 2.7 million in 1982–83 and at 2.7 million in 1983–84?

§ Mr. Brittan
Those figures are not forecasts, but assumptions, as the hon. Gentleman knows, from which certain other consequences are drawn. The hon. Gentleman is ignoring the past. We are talking in terms of the impact of inflation on unemployment. We are saying that, in the longer term, failure to tackle the problem of inflation is likely to increase rather than to reduce the level of unemployment. All the evidence and history of the past few years supports that. The historical 1071 factors that we have inherited, and the world recession factors, will not prevent unemployment from reaching higher levels in the short term.

§ Mr. Bruce-Gardyne
To put the figures in clearer perspective, will my right hon. and learned Friend give the House the figures for the last six months, as those are probably more revealing? Does he agree that, as a measure of the Government's progress, those figures show us to be among the lower ranks in inflation throughout the European Community?

§ Mr. Brittan
My hon. Friend is right. The underlying six-monthly rate of inflation, on an annual basis, is around 10 to 11 per cent. That is the most reliable information.

§ Mr. Straw
When will the Chief Secretary and his colleagues cease to make the fraudulent claim that the country's difficulties are connected with the world recession? Has he not read the Common Market Commission's statement, which showed that unemployment in this country rose by 66 per cent. last year, which was three times the rate of the EEC average, and that deflation in this country was twice as bad as in any other European country? As we are referring to the past, will the Chief Secretary confirm that the rate of inflation that he inherited in May 1979 was just over 10 per cent., which was well below the current level?

§ Mr. Brittan
The underlying six-monthly rate in May 1979 was 12.2 per cent., and rising. It has never been suggested that the world recession operates in a uniform way or that it is the only factor influencing unemployment in this country, but it is absurd to suggest that our unemployment has nothing to do with the world recession. If our unemployment is higher than elsewhere, it is caused largely by the fact that in the past we have given ourselves pay increases that we have not earned, and as a result have priced ourselves out of jobs.