13. Mr. John P. SmithTo ask the Chancellor of the Exchequer for how many months since June 1987 United Kingdom inflation has been below the average inflation rate in the European Community.
§ Mr. Norman LamontNone.
Mr. SmithGiven that the Government's first, second and third priorities are supposed to be tackling inflation but our inflation is above the European average and, what is more important, almost twice the average of other exchange rate mechanism countries, what hope do the Government have of tackling unemployment and restoring manufacturing industry?
§ Mr. LamontThe hon. Gentleman might have acknowledged that in the lifetime of this Government the average inflation differential between this country and the EEC has been under half of 1 per cent. whereas during the lifetime of the last Labour Government it was about 4 per cent. We have got inflation down to levels far below those ever achieved by the last Labour Government, or which would ever be achieved by Labour in office.
§ Mr. John BrowneDoes my right hon. Friend agree that most people praise the Government for reducing inflation, but that it means that real interest rates are rising in the face of a deep recession? What prospects can my right hon. Friend offer us of reducing real interest rates in those circumstances while Britain remains a member of the exchange rate mechanism?
§ Mr. LamontReal interest rates in this country are lower than in Germany, France or Italy. As inflation comes down, we have greater flexibility on interest rates.