HC Deb 26 January 1989 vol 145 cc1169-70
8. Mr. Harry Greenway

To ask the Chancellor of the Exchequer what was the average (a) inflation and (b) interbank rate (i) since May 1979 and (ii) between March 1974 and May 1979; and if he will make a statement.

Mr. Lawson

The average rate of inflation since May 1979 has been 7½ per cent. compared with 15½ per cent. between March 1974 and May 1979. The average three-month interbank rate since May 1979 has been 12 per cent. compared with 10½ per cent. between March 1974 and May 1979. In other words, with interest rates 1½per cent. higher than under Labour, we have enjoyed inflation 8¼per cent. lower.

Mr. Greenway

Is it not clear from my right hon. Friend's reply that the Government's record on inflation is at least twice as good, perhaps nearly three times as good, as that of the last Labour Government? Is it not also clear that his policy of high interest rates is beginning to work, although the full effects will not be known for some time yet?

Mr. Lawson

My hon. Friend is right. Inflation under this Government has been less than half the rate of inflation under Labour and, of course, at the present time, it is lower still than that and it will continue over a period of time to fall.

As for the second half of my hon. Friend's question, I forget precisely what it was and I apologise to him.

Mr. Robert Sheldon

When will the Chancellor of the Exchequer stop complaining about mortgage interest payments increasing the retail prices index when, at the same time, he is obtaining great advantages from the fact that house prices are not part of the retail prices index? As they have shown an explosive inflation, is he not rather lucky?

Mr. Lawson

Asset prices are not part of the retail prices index in any country in the world and, indeed, we are one of the only two countries in the European Community, out of 12 nations, that have mortgage interest payments in their consumer price index, the only other one being Ireland. It is an eccentric, unwise and economically unsound thing to have and we get the underlying trend very much more clearly. This is widely accepted by economists of all parties and none, if we look at the retail prices index, after extracting mortgage interest payments.

I am glad to tell my hon. Friend the Member for Ealing, North (Mr. Greenway) that I have now remembered what he said. Yes, indeed, the policy is very clearly working.

Mr. Hind

Does my right hon. Friend agree that the contrast between the performances of the Labour Government and this Government is demonstrated by the survey published in the press today which showed a very bullish attitude among 500 senior managers in industry? Most of them expect orders and investment to rise this year and at least one third expect to create new jobs.

Mr. Lawson

My hon. Friend is right. Of course, the fundamental confidence of British industry is also shown by its investment intentions which continue to run very high, as was evidenced by the most recent CBI survey. The only thing that might cause a tremor among industrialists is were there to be at any future date a slight glimmer of a fear that the Labour party might be elected to office.