HC Deb 23 February 1989 vol 147 cc1137-8
12. Mr. David Martin

To ask the Chancellor of the Exchequer what was the increase in the tax and prices index in the 12 months to December 1988.

Mr. Lawson

4.8 per cent.

Mr. Martin

In order to get these things into perspective, would my right hon. Friend care to estimate the likely consequences for the rate of inflation of the spending, taxing and borrowing policies of the Labour party in the unlikely event of it ever regaining office?

Mr. Lawson

That is, as my hon. Friend says, an extremely unlikely eventuality. It is quite clear that, if the Labour party were ever to put into practice its policies of bringing interest rates down when it is not safe to do so, having a depreciated currency, spending more and pushing up borrowing again, we would see inflation go through the roof, just as it did when it was last in office. That is why, although I am very concerned about the current rate of inflation, I am certainly not going to take any lectures from the Labour party.

Mr. Robert Sheldon

Since the tax and prices index was the creation of the Chancellor of the Exchequer in his attempt to produce what he thought might be a fairer method of calculating price increases, will he now take some action to deal with soaring house prices, which are not reflected at all in the tax and prices index?

Mr. Lawson

The right hon. Gentleman is not strictly correct, because mortgage interest payments—it is, of course, mortgage interest payments not mortgage interest rates that reflect house prices—are in the tax and prices index, just as they are in the RPI. Since the right hon. Gentleman mentioned that this is a useful index, I will make a comparison with the Government in which he was a Treasury Minister. In the five and a half years or so that I have been Chancellor of the Exchequer the tax and prices index has gone up at an average rate of 3.7 per cent. a year, whereas during the five and a quarter years of the Government of which he was a member it went up by 16.1 per cent. a year.

Mr. Yeo

Is my right hon. Friend aware that if he is bold enough on 14 March to use a substantial part of his record budget surplus to cut income tax he could produce a fall in the tax and prices index?

Mr. Lawson

I am interested in my hon. Friend's suggestion, but I have to tell him—I trust this will not be considered a leak—that the Budget that I shall introduce on 14 March will be prudent and cautious.