HC Deb 18 January 1990 vol 165 cc391-2
1. Mr. Andrew MacKay

To ask the Chancellor of the Exchequer if he will make a statement on the current level of inflation.

The Economic Secretary of State to the Treasury (Mr. Richard Ryder)

The underlying rate of inflation excluding mortgage interest payments is 6.1 per cent.

Mr. MacKay

Does my hon. Friend recall that before Christmas shop stewards at Ford sensibly told their members that excessive wage claims would lead to job losses and loss of business for the company? Therefore, is he like me, disappointed at the wage offer that has been made by the Ford management and so irresponsibly rejected by the trade unions in the past week?

Mr. Ryder

I am disappointed that the unions at Ford have not accepted the offer that has been made to them. Excessive pay awards ultimately cause unemployment unless they are matched by increases in productivity.

Mr. Livingstone

Does the Minister agree that the biggest impact on reducing inflation would be achieved by tackling the deficit on the long-term capital flow out of Britain, which is the basic reason why the Government need to keep short-term interest rates so high to attract short-term capital into the country to balance that deficit? Does the Minister really think that his constituents—or anybody in Britain—values the freedom to carry on paying vast mortgage rates simply to allow British finance capital to flow abroad at the rate of a £30 billion deficit this year?

Mr. Ryder

Industry has far more to fear from inflation and high pay awards than from interest rates.

Mr. Tim Smith

Will my hon. Friend ignore those who are now arguing that it is necessary to increase taxation to combat inflation? Will he confirm that, as the Red Book stated last year, the Government's long-term objective remains achieving a balanced Budget?

Mr. Ryder

My hon. Friend's question bears a close resemblance to a Budget submission. I am sure that my right hon. Friend the Chancellor will have heard it.

Mr. John Smith

Is it not astonishing that the Chancellor of the Exchequer himself does not answer a direct question on the rate of inflation? Do the Government stand by the Chancellor's prediction that inflation will have an annual rate of 5.75 per cent, by the fourth quarter of this year? Does he not understand that if the Government deliberately increase the cost of living by forcing up mortgage rates, and electricity, water and transport prices and by introducing the poll tax, they are guilty of what the Confederation of British Industry has described as causing inflationary own goals? When will the Government admit that they are responsible for the underlying rate of inflation?

Mr. Ryder

I take no lectures from the right hon. and learned Gentleman on inflation because when he was a member of the Callaghan Government, inflation averaged 15½ per cent., whereas, under this Government at the moment the underlying rate of inflation is 6.1 per cent. The answer to the right hon. and learned Gentleman's first question is yes, and the answer to his second question is that industry has far more to fear from inflation and high pay awards than from high interest rates.