Inflation

HC Deb 19 June 1986 vol 99 cc1183-4

3. Mr. Andrew MacKay

asked the Chancellor of the Exchequer what he assesses to be the main factors currently influencing the level of inflation.

The Chancellor of the Exchequer (Mr. Nigel Lawson)

The economic policy of Her Majesty's Government.

Mr. MacKay

I thank my right hon. Friend for that excellent reply. Does he agree that the people who feel most vulnerable when there is a high inflation are pensioners? Does he further agree that there are certain factors in inflation figures which affect pensioners more than other parts of the community? Can he say whether those factors in commodity prices are going up faster than other items in the inflation figures?

Mr. Lawson

My hon. Friend is right in saying that those who are most affected in the community by high inflation are the elderly, pensioners and others on fixed incomes. That is why the greatest social service that a Government can perform is to bring inflation down and work towards stable prices. As for the slightly different consumption patterns of the elderly and the average member of the population, my hon. Friend may be aware that there is a pensioner price index, which addresses itself to that. In fact, during the period when we have been in office the pensioner price index has risen by less than the retail prices index as a whole.

Mr. Willie W. Hamilton

What on earth has the Government's economic policy got to do with plummeting oil prices and other commodity prices?

Mr. Lawson

I remind the hon. Gentleman that the Government's success in getting inflation down long predated the fall in the oil price.

Mr. Hickmet

Does my right hon. Friend agree that those who say that we can have a little more public expenditure and a little more inflation are in fact advocating a dangerous course? Does he further agree that there is no guarantee that more public expenditure would lead to more employment or, indeed, increased services, and that if it were the job of the Government to employ people we would all be living in eastern Europe, with dreary standards of living and dreary services?

Mr. Lawson

My hon. Friend is making a point that is well understood by all those who have responsibility for the conduct of economic policy, not only in this country, but throughout the Western world. Indeed, in all the European countries, where, sadly, unemployment is too high, if there were a simple answer of bringing down unemployment by increasing public expenditure, that would have been introduced long ago. If the policies of right hon. Members in the Labour party were introduced, and there were an increase in public expenditure of £24 billion, the result would be sharply higher inflation and sharply higher unemployment.

Mr. Hattersley

Is the Chancellor of the Exchequer prepared to test the validity of his claim about the effect of his Government's policies on inflation by publishing in the Official Report the calculations made by the Central Statistical Office of the reasons why inflation has fallen over the past year?

Mr. Lawson

The Central Statistical Office merely reports what has occurred. It is not engaged in economic analysis.