Inflation

HC Deb 06 April 1989 vol 150 cc325-6

6. Mr. Buckley

To ask the Chancellor of the Exchequer how many members of the European Economic Community have inflation rates lower than that in the United Kingdom.

Mr. Lawson

On the basis of comparable figures, seven EEC member countries currently have lower inflation than the United Kingdom and four have higher inflation.

Mr. Buckley

Does the Chancellor of the Exchequer agree that the United Kingdom inflation rate of 7.8 per cent. is largely a consequence of Government policy in pushing up electricity, gas and transport prices and of the high mortgage rate, which is punishing people in this country?

Mr. Lawson

No, I do not agree with any of that and, indeed, the higher mortgage rates, which are a consequence of higher interest rates generally, are necessary to get inflation down because I do agree that inflation is currently too high. Indeed inflation, which during the whole of our period of office has averaged 1 per cent. above the European Community average, is currently 3 per cent. above the European Community average. However, to put that in perspective, it is worth recalling that during the whole of the period of the Labour Government, our inflation rate was 6 per cent. above the European Community average.

Mr. Dykes

Is not the ominous truth now dawning that higher interest rates actually add to the rate of inflation, which in turn creates an additional spiral?

Mr. Lawson

No, Sir.

Mr. Gordon Brown

Will the Chancellor confirm that after the rises in gas, electricity and water charges, in rents and rates, including the poll tax in Scotland, and even in television licences, prescriptions and the new eyesight charges, the petrol price rise is the ninth rise in one week? How many more price rises must we have on his road to zero inflation?

Mr. Lawson

The hon. Gentleman is extremely perceptive and he has noticed that he has just informed the House of the interesting fact that, until inflation is zero, prices tend to rise.

Sir Dudley Smith

Is my right hon. Friend aware that despite all his great efforts in this respect, there will always be considerable difficulties for any Government in this country while we have the relentless annual wage awards in both the private and public sectors, irrespective of performance?

Mr. Lawson

My hon. Friend is certainly right that it is desirable that British industry should keep a tight control of its costs and that, of course, includes, most importantly, pay costs. Nevertheless, that is not the primary cause of inflation, although it does add to the difficulties for British industry in dealing with the current situation. But the remedy is in its own hands. But inflation is the responsibility of the Government and it is the responsibility of the Government to get inflation down by pursuing an adequately tight monetary policy and that is what we are doing. The Opposition, by their repeated calls, which we have heard again today, for lower interest rates are revealing themselves, once again, as the party of higher inflation.