HC Deb 16 January 1992 vol 201 cc1084-6
5. Mr. Andrew Mitchell

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

13. Mr. Andrew MacKay

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

Mr. Norman Lamont

All-items RPI inflation was 4.3 per cent. in November.

Mr. Mitchell

Does my right hon. Friend agree that increasing expenditure on day one of a new Government while failing to deal with the important issue of taxation is the fastest way back to the high levels of inflation which characterised all Labour Governments?

Mr. Lamont

My hon. Friend is absolutely right. There is nothing wrong with massive increases in public expenditure, provided that the Opposition are open about the fact that they plan massive increases in taxation to finance them.

Mr. MacKay

Does my right hon. Friend agree that it is difficult to take Labour seriously on unemployment when under its policy inflation would rise following increases in public expenditure and our competitiveness in world markets would diminish?

Mr. Lamont

My hon. Friend is absolutely right. Labour does not seem interested in getting inflation down. Indeed, the Leader of the Opposition never even mentioned inflation in his speech at the party conference. Reducing inflation is the absolute first condition for medium-term prosperity. The fight again inflation must go on.

Mr. Graham

While the Chancellor has been concentrating—unsuccessfully—on bringing down inflation, unemployment is raging and further factory closures and redundancies have been announced nearly every week since he came to office. When will he take steps to reduce interest rates to give some of the companies in Britain an opportunity to survive, fight and compete internationally? Should not the Chancellor hang his head in shame and resign now, and let the Labour party get on with bringing this country back to the richness that it deserves?

Mr. Lamont

I am sure that the hon. Gentleman will welcome the reduction of 3.5 percentage points in interest rates in the past 12 months. I am sure that he also welcomes today's news that the Abbey National, Halifax and Nationwide building, societies are reducing their lending rates to, as they put it, give a fillip to the housing market. I am puzzled by the hon. Gentleman's comment that we are unsuccessful in getting inflation down. At 4.3 per cent., our inflation rate is below the average of the European Community. I hardly dare to mention the 15½ per cent. average rate of inflation under the last Labour Government. Everything that Labour says about public spending shows that it is completely indifferent to inflation, which would have a bad effect on unemployment.

Ms. Armstrong

Will the Chancellor explain why after the 1983 and 1987 elections inflation and other indicators rose significantly but the Government managed to get them down just before those elections? Is that the Government's real policy? What sort of guarantee can the Chancellor give that that sort of thing will not happen again? The only guarantee that I can give is that there will not be a Tory Government after the 1992 election.

Mr. Lamont

Perhaps the hon. Lady will tell me under which of the three Conservative Governments since 1979 the average rate of inflation was remotely near that of the Labour Government from whom we took over.

Mr. Tim Smith

Will my right hon. Friend confirm that the figures for factory output prices, which were published earlier this week, show that the underlying rate of inflation continues to fall? What effect does he expect the very welcome news about mortgage interest rates to have on the retail prices index?

Mr. Lamont

My hon. Friend is drawing attention to an important point about the underlying rate of inflation. We have had some excellent producer prices figures. Excluding the volatile food, drink and tobacco sectors, which are influenced by Budget changes, the rate of inflation has fallen to 3.8 per cent. It is forecast to be 3½ per cent. in the fourth quarter of this year, which will be the lowest figure since 1969. The fact that the underlying rate of inflation is falling so sharply is a very good indicator and is very encouraging for the trend of the headline rate.

As for the second part of my hon. Friend's supplementary question, I cannot anticipate entirely what will happen, but the reduction in mortgage interest rates will obviously have a beneficial effect.

Mrs. Beckett

Does the right hon. Gentleman recall telling the House that a rise in inflation was expected in these months for what he called "technical reasons" shortly after the Prime Minister told the country that the Government had inflation licked? Did the Prime Minister speak in ignorance, or was he trying to keep the British people in ignorance before a possible November election?

Mr. Lamont

As always, the Opposition should quote my right hon. Friend the Prime Minister correctly. My right hon. Friend said that we had inflation licked in a way that we had not had it licked for years. The trend of inflation is very good. The statistics prove that absolutely, and everybody except the hon. Lady knows it.