Inflation (Hansard, 28 February 1991)

§ 8. Mr. Bell
To ask the Chancellor of the Exchequer what is his forecast for the rate of inflation for October 1991.

§ Mr. Norman Lamont
The autumn statement forecast is for a sharp fall in all-items RPI inflation to 51 per cent. by the fourth quarter of this year. I will publish a new forecast with the Budget.

§ Mr. Bell
I thank the Chancellor of the Exchequer for that forecast. The Chief Secretary to the Treasury spoke about the "unparalleled success" of the economy. Does the Chancellor recall a statement by the Prime Minister on 24 April 1988 that what was unique about the recovery in the 1980s was that there was sustained growth without the resurgence of inflation? At the time of that statement inflation was 3.9 per cent. Now there are record house repossessions, record business failures and record unemployment. Who will take the blame for this sad and sorry situation—the Chancellor of the Exchequer or the Prime Minister?

§ Mr. Lamont
Like the right hon. and learned Member for Monklands, East (Mr. Smith), the hon. Gentleman ignores all the good things that happened in the 1980s and focuses on one statement in one year. He ignores the fact that throughout the 1980s employment in the United Kingdom grew faster than in most other European countries and that we had lower unemployment than in Europe. He also ignores the fact that in the 1980s output in Britain was higher than that in France or Germany and that business investment grew faster than in any of the G7 countries except Japan. Those factors show that the 1980s were years of considerable economic achievement.

§ Mr. Burns
Will my right hon. Friend contrast that forecast with an annual rate of inflation in August 1975 of 26.9 per cent? May I take it that as inflation continues to fall and when it is economically prudent interest rates will continue to fall, too?

§ Mr. Lamont
As I have already emphasised, we can cut interest rates only as and when it is prudent to do so. My hon. Friend is right on his first point. The speeches by the right hon. and learned Member for Monklands, East, (Mr. Smith), if they are anything to go by, and his public spending plans and attitude to interest rates in 1987 and 1988 show all too clearly that Labour would again spark off a great inflationary cycle.

Mr. John D. Taylor
It is encouraging to hear the Chancellor of the Exchequer suggest that the inflation rate will fall to 5.5 per cent. in October. Is that an appropriate rate of inflation for a general election?

§ Mr. Lamont
Fortunately, that is not within my departmental responsibility. I repeated the forecast contained in the previous autumn statement and I said that another forecast would be issued at the time of the Budget.

§ Mr. Simon Coombs
Does my right hon. Friend agree that Labour policies would be likely to drive inflation up to the levels mentioned by my hon. Friend the Member for Chelmsford (Mr. Burns)? Will he confirm that it remains Government policy to achieve long-term zero inflation?

§ Mr. Lamont
It does not look as though France, Germany or Japan are about to achieve zero inflation. Our first objective must be a sharp reduction in inflation to bring it down to the level of that of our competitors. We are absolutely on track to do that and will not be blown off course in our objective.

§ Mr. Nicholas Brown
Two of the major factors in stoking up inflation in recent months have been public utility price rises in the run-up to privatisation and its aftermath and, of course, the poll tax. I do not know whether Finance Ministers ever get nicknames such as Stormin' Norman, in the same way as military leaders do, but it would be nice if the Chancellor would tell us his plans to bear down on those two elements of inflation.

§ Mr. Lamont
The Government's intentions on the community charge, as my right hon. Friend the Secretary of State for the Environment said, will be announced to the House in due course.
I do not agree with the hon. Gentleman's first point. Utility prices in recent years have underperformed inflation in many spheres. The real causes and origins of our inflation go back to 1987–88 when, with hindsight, our interest rates were too low.