Retail Prices (Hansard, 4 March 1993)

§ 8. Mr. Stephen
To ask the Chancellor of the Exchequer what was the change in retail prices during the month of January.

§ Mr. Portillo
Between December and January the retail prices index fell by 0.9 per cent. This was the largest monthly fall recorded for nearly 35 years.

§ Mr. Stephen
I am grateful to my right hon. Friend. Does he accept that what the economy of this country needs is low inflation, low taxes, moderate interest rates and a competitive exchange rate? It does not need a policy of raiding our constituents' pockets and spending their money, which is the only policy ever offered by the Opposition parties.

§ Mr. Portillo
The list of features with which my hon. Friend began his supplementary question is absolutely right. I would add that the productivity performance of manufacturing industry is extremely encouraging and that our competitiveness is shown not only in the exchange rate but in our performance on wage unit costs. Those are very encouraging features. My hon. Friend is also right to say that the Labour party simply does not understand such matters and still looks to spend more money and to raise taxes considerably, believing that recovery can somehow be stimulated by higher spending. That is a delusion.

§ Ms. Harman
Does the Chief Secretary not realise that what this country also needs is investment in training and in industry? Does he not understand the anger that there will be in this country at the fact that millions of pounds of European Community money earmarked for Britain, for training and investment in the regions, will not come here because the Government simply have not applied for it?

§ Mr. Portillo
We seem to be rather a long way from the subject of prices. Nevertheless, I have no reason to believe that there will be any difficulty in providing the public expenditure cover that the European Community wants for European regional development fund grants. We have made pledges, we made provision in the public expenditure survey, and I imagine that Sir John Kerr will be in a position to write to Mr. Milian in the near future. I see no difficulty whatsoever.

§ Mr. Sykes
Does my right hon. Friend agree that we have heard more than the usual amount of nonsense from the little Clintons opposite—[Interruption.] —especially from Bolsover's answer to Hillary Clinton? If Opposition Members were really interested in helping the jobless they would abandon inflationary policies such as the minimum wage and the social chapter.

§ Mr. Portillo
On the last part of his question, my hon. Friend is absolutely right. It is difficult to imagine policies that would be more destructive of jobs than are the minimum wage and the social chapter. The President of the United States has recognised the need to address his country's deficit. In the context of the United Kingdom, so far as I remember, that has never been recognised by the Labour party.

§ Mr. Bryan Davies
Does the Minister subscribe to the old economic adage that any fool can get inflation down if he is prepared to tolerate a high enough level of unemployment?

§ Mr. Portillo
I do not know whether that is meant to explain why the last Labour Government produced inflation at a rate of 27 per cent. If so, it is a rather poor explanation.

§ Mr. Brazier
Does my right hon. Friend agree that the remarkable figure for retail price inflation, combined with the very low figure for unit wage costs and the over-capacity in the property market and much of industry, suggests that we really are on top of inflation now and emphasises the importance of ensuring that, over the next two years, interest rates will be determined by domestic monetary conditions and not by reference to economies that are not in step with our own?

§ Mr. Portillo
My right hon. Friend the Chancellor has made very clear the range of conditions that he will examine to determine the appropriate level of interest rates. My hon. Friend is right to say that there are significant disinflationary pressures in the economy. For example, the money supply—M4—is below the monitoring range at present and we have seen falling house prices. However, I should caution my hon. Friend that it is always easy, when inflation has been brought down, to believe that it does not matter. Inflation does matter, not least from the point of view of our competitiveness.