§ 1. Mr. Wallace
To ask the Chancellor of the Exchequer what is his estimate of underlying inflation in the British economy; and if he will make a statement.
§ The Chancellor of the Exchequer (Mr. Nigel Lawson)
The underlying inflation rate, as measured by the retail prices index excluding mortgage interest payments, was 5.7 per cent. in March.
§ Mr. Wallace
Does the Chancellor of the Exchequer accept that inflation, as measured by the RPI, is only one measure of the inflationary tendencies within the economy? Does he accept that the huge deterioration in our trade account and the fact that unit cost are rising faster than those of any of our competitors, are other indicators? Is not the underlying trend much higher than he has been prepared so far to admit?
§ Mr. Lawson
No, I do not accept at all that the underlying trend is higher than I have been prepared to admit, although I certainly accept that it is too high and that it is necessary to get it down. That is what the tightening of the monetary policy over the past year has been designed to achieve. I accept also that it is perfectly true, as the hon. Gentleman says, that the rise in imports is a sign of excessive pressure of domestic demand in this country. Again that is addressed by the same tighting of monetary policy and the raising of interest rates that has occurred and that is now clearly having an effect.
§ Mr. Bill Walker
Does my right hon. Friend agree that it is only the policies of my right hon. Friend and the Government that give us any hope of reducing the present rate of inflation—both underlying and otherwise? If one were to incorporate any of the policies offered by the Opposition, the effect would be exactly the opposite. Inflation would go up.
§ Mr. Lawson
My hon. Friend is right. We do not know very much about the Opposition's policies. We have heard a few leaks. We understand that a little bit more is to be published quite shortly. I dare say that it will be as evasive and as elusive as what has been offered so far. Nevertheless, we are looking forward to it with great interest and we shall examine it very carefully. In the meantime, what we have to go on is the Opposition's record. Their record is clear. When they were in office, inflation averaged over 15 per cent.
§ Mr. Gordon Brown
But why is inflation twice what it was last year and twice what it was when the right hon. Gentleman became Chancellor of the Exchequer, pledged to eliminate it? Why is it that, even after housing costs are excluded, inflation is 50 per cent. higher than it was last year, when in Japan it is 1.2 per cent. and in Germany 2.7 per cent? Will the Chancellor tell us why his anti-inflationary policies have been so unsuccessful?
§ Mr. Lawson
The comparison that inflation is 50 per cent. higher than it was last year, is a rather absurd one. By the same token, the German inflation rate is 150 per cent. 345 higher than it was last year. In that case, according to the hon. Member for Dunfermline, East (Mr. Brown) we are clearly doing very much better than the Germans are. The phoney figures that he continually scatters across the Dispatch Box carry no weight at all and just make him something of a laughing stock. The reason for the rise in inflation is quite clear. It is that domestic demand has been rising excessively and that the money GDP has been rising excessively. I make no apology to the Opposition whatever, because the underlying rate of inflation today, even though it is far too high, is still lower than it was in the lowest month that the Opposition ever had during the whole of their period in office.