Inflation (Hansard, 17 June 1982)

§ 4. Mr. Greenway
asked the Chancellor of the Exchequer what are the prospects for the level of inflation at the end of the year.

§ 15. Mr. Kenneth Carlisle
asked the Chancellor of the Exchequer what is his latest assessment of prospects for the rate of inflation by the end of 1982.

§ 16. Mr. Proctor
asked the Chancellor of the Exchequer if he will make a statement on the progress being made towards reducing the rate of inflation.

§ 20. Mr. Adley
asked the Chancellor of the Exchequer if he will make a statement on the trend of inflation.

§ Sir Geoffrey Howe
Inflation is now in single figures. At the time of the Budget we forecast a year-on-year rate of 9 per cent. by the end of this year and 7½ per cent. by the middle of next, but we could well make rather faster progress than that.

Several Hon. Members
rose—

§ Mr. Speaker
Order. I propose to call first the four hon. Members whose questions are being answered.

§ Mr. Greenway
Will my right hon. and learned Friend confirm that the Government are on target for a lower average rate of inflation than they inherited and that they are the first Government in 30 years to achieve that? Will he also confirm that the cost of the Falklands operation will not be allowed to increase inflationary pressures in the economy?

§ Sir Geoffrey Howe
The answer to my hon. Friend's second question is "Yes", and there are later questions on the Order Paper dealing with that subject.
The average level of inflation under this Government will be lower than that under their predecessors, and that will be the first time that that has happened since the war.

§ Mr. Kenneth Carlisle
Is it not true that for the first time for many years Britain's inflation rate is lower than those of many of our competitors? Does my right hon. and learned Friend also agree that inflation must go even lower if we are to become even more competitive and to provide the best climate for investment, both of which are needed to secure more jobs? What are the prospects for inflation continuing to fall next year?

§ Sir Geoffrey Howe
The forecast that we have given indicates the prospect of a lower level of inflation next year. As I have indicated, the forecast points to 7½ per cent. by next spring. However, beyond that I entirely agree with my hon. Friend that although we have improved our performance, so that it is now better than that of many of our international competitors, we must go on making further substantial progress if, for example, we are to begin to match the levels of inflation achieved in Germany and Japan.

§ Mr. Proctor
I congratulate my right hon. and learned Friend on the Government's achievement in reducing inflation to single figures. What further proposals does he have in mind to reduce public expenditure still further so that the rate of inflation can fall even more?

§ Sir Geoffrey Howe
My hon. Friend is entirely right to point to the importance of continued control of public borrowing and public expenditure if we are to achieve further success in reducing inflation and, equally important, interest rates alongside that.

§ Mr. Adley
Does my right hon. and learned Friend not agree that it is clear from the Government's achievement—

§ Mr. Cryer
These questions are all planted.

§ Mr. Adley
The hon. Gentleman makes a serious allegation. I therefore restrict myself to asking my right hon. and learned Friend whether he accepts that my question was not planted? Is he able to draw some 1072 satisfaction from the fact that four of his hon. Friends voluntarily and separately chose to raise the subject of inflation at this time?

§ Sir Geoffrey Howe
I draw much comfort from the fact that our success has been acclaimed with such uniform enthusiasm by my hon. Friends. I notice the reluctance of Opposition parties to table questions on this matter.

§ Mr. Jay
Is the Chancellor's message to the nation that, owing to the huge success of the Tory policies, we now have 3 million unemployed?

§ Sir Geoffrey Howe
My message to the nation is precisely that which is encapsulated in every communiqué of every international gathering of recent months, and most recently in the communiqué of the Paris summit, to the effect that growth and employment must be increased. This will be attained on a durable basis only if we are successful in our continuing fight against inflation. I note, as the House should note, the extent to which policies that have been adopted in France are now being brought more closely into line with ours to achieve that objective.

§ Mr. Hoyle
Is not the truth of the real world, away from the Treasury mandarins, that redundancies are still increasing? Has tie Chancellor seen the announcements by BP and ICI this morning? All that is on account of the right hon. and learned Gentleman's disastrous economic policy. Is not the best service that he can do for the nation to resign forthwith?

§ Sir Geoffrey Howe
The unreality of the world inhabited by the hon. Gentleman is demonstrated by the absurdity of his last proposition. He will find that in the real world every other country is facing comparable rises in unemployment—

§ Mr. Austin Mitchell
No.

§ Sir Geoffrey Howe
—and recognises the need to maintain effective policies to fight inflation. The House must realise that the unemployment that we face today is not the price that we pay for fighting inflation now, but the price that we pay for having put off the fight against inflation for so long in the past.

§ Mr. Higgins
Has my right hon. and learned Friend noticed the tendency of those in the Labour Party to compare the rate of inflation now with that which existed when we came into office, while ignoring the fact that when we came into office the rate of inflation was accelerating, whereas it is now declining? Does he agree that the main reason for that change is the difference in attitude on public sector pay? Is it not essential for us to resist inflationary pay claims in both the public and private sectors if we are further to reduce the rate of inflation?

§ Sir Geoffrey Howe
My right hon. Friend is correct. Over the past year, the year-on-year rate of inflation fell from 12 per cent. in April 1981 to 9.4 per cent. in April this year. Over the last year of the Labour Government, the year-on-year rate of inflation increased from 7.7 per cent. in May 1978 to 10.3 per cent. in May 1979, and was going up.
My right hon. Friend is also right to draw attention to the continued importance of securing further reductions in the rate of increase of prices and pay costs, and a progressive reduction of pay settlements, if we are to 1073 continue the success against inflation, while also beginning to secure greater success against unemployment.

§ Mr. Straw
Is the Chancellor aware that this measly performance of bringing inflation down to the level that the Government inherited from the Labour Government three years ago has been achieved at the cost of 3 million and more jobless and that there is no prospect of unemployment decreasing in the next year, even if inflation decreases a little more? Has the Chancellor forgotten the major pre-election interview that he gave to The Times and the promise that he would bring inflation down to between 2 or 3 per cent. in about three years' time", which was last year? Who does he blame for that failure—himself, his colleagues or the country?

§ Sir Geoffrey Howe
The hon. Gentleman may have overlooked the fact that two months after we were elected into office there was a second massive oil price explosion, taking the price of oil to 26 times what it had been in 1970. He may also have overlooked the fact that we inherited from his Government a rapidly accelerating rate of inflation, sustained by the explosive collapse of the Labour Party's pay policy.