Inflation (Hansard, 28 November 1985)

§ 10. Mr. Foulkes
asked the Chancellor of the Exchequer what criteria he uses in forecasting the level of inflation.

§ Mr. Lawson
The details of the inflation forecast are set out in the autumn statement.

§ Mr. Foulkes
Has the Chancellor seen the report of the Institute of Fiscal Studies, which shows that pensioners' 1006 cost of living is going up more than the retail prices index, thereby pushing down pensioners' buying power? Since the Government have allowed for only a 1 per cent.—1p in the pound—increase for pensioners next year, what action will he take to remedy that?

§ Mr. Lawson
The increase that pensioners get in the next uprating will be geared precisely to the increase in the retail prices index. If that increase is low, the whole nation, particularly pensioners, should welcome it. Pensioners had an increase of 7 per cent. this month. The pensioner prices index at 5 per cent. is less than the retail prices index at 5.4 per cent.

§ Mr. Leigh
Will my right hon. Friend direct the attention of Labour Members to a fact that they seem to have a curious amnesia about—that the forecast rate of inflation at 4 per cent. is exactly half the rate of inflation achieved in the best month of the best year of the previous Labour Government?

§ Mr. Lawson
My hon. Friend is right to point to that contrast. The highest monthly rate of inflation during this Parliament is lower than the lowest monthly rate of inflation in the previous Labour Government. It is extraordinary that Labour Members should wish for a high rate of increase in the pension, because, as that is geared to the RPI, it could only mean a high rate of inflation. Is that what they want?

§ Mr. Ashton
As this year profits are expected to increase by 28 per cent. and wages by only 7 or 8 per cent. and as since 1981 profits have gone up in total by 96 per cent. and wages by 46 per cent., why does the right hon. Gentleman continue to demand cuts in wages to keep down inflation?

Hon. Members
What has that to do with the question?

§ Mr. Lawson
As my right hon. and hon. Friends point out, that has little to do with the question. Nevertheless, I am happy to answer it if you, Mr. Speaker, are happy that I should do so.
I welcome the recovery in profitability in industry, which had reached absymally low levels under the previous Labour Government. That recovery has allowed investment to go ahead under this Government, leading to more people in work.

§ Mr. Yeo
Does my right hon. Friend agree that the combination of low and falling inflation with steady growth and a good level of company profitability offers the most favourable circumstances for creating new jobs?

§ Mr. Lawson
My hon. Friend is correct. It is that combination that we have secured. It is a prize which has eluded previous Governments and which we intend to continue to secure by continuing with the policies on which we have embarked.

§ Mr. Hattersley
May I get the Government's view, position and policy on wages and inflation clear? A moment ago the Chancellor endorsed the party-political boast that wage settlements were running ahead of inflation. Is he glad about that, and does he want it to continue for the rest of the Government's lifetime?

§ Mr. Lawson
I am sorry that the right hon. Gentleman has such difficulty in understanding elementary economic facts. Under this Government, growth in living standards generally has risen far more than it did under the previous 1007 Labour Government. However, I regret that too much has gone to those in work, as a result of which those out of work have increased in numbers. Therefore, greater restraint by employers in awarding wage increases would lead to more people being in work. However, the total rise in living standards overall is three or four times as great as it was under the previous Labour Government.