HC Deb 19 May 1993 vol 225 cc235-6
11. Mr. Cohen

To ask the President of the Board of Trade what assessment he has made of the effect on businesses, consumers and trade of the recent changes in the price of commodities.

Mr. Sainsbury

The impact of movements in commodity prices varies between businesses.

Mr. Cohen

Following the exchange rate mechanism debacle eight months ago, which cost Britain about £2 billion, are not higher prices now in the pipeline? Is not that reflected by commodity price rises? Timber is up 126 per cent., sugar 46 per cent., coffee 38 per cent., beef—[HON. MEMBERS: "Reading."] Yes, reading. They are very high figures, are they not? Beef is up 35 per cent. and cotton 25 per cent. Will not that harm businesses and the standard of living of people on tight incomes and make the nation's economic recession worse? Are not the Government caught in a new web of recession of their own making?

Mr. Sainsbury

I hope that the hon. Gentleman will share the Government's view that the control of inflation is an extremely important objective and is very important to help manufacturing industry, particularly in export markets. I hope that he is also aware that food price inflation has been running at a very low level. It was only 1.5 per cent., which was lower than the general level of inflation in the year to March 1993.

The hon. Gentleman might not be aware that the chairman of one of our leading supermarket companies —indeed, I think that I can say the leading supermarket company in the country—recently forecast that true price inflation would increase from about 2 per cent. to 3 or 4 per cent. next year because of devaluation. We should like to see less, but that is not an astronomical figure.

Mr. Budgen

Will my right hon. Friend confirm that a devaluation affects only some prices, not all prices, and that inflation can be caused only by an increase in the money supply?

Mr. Sainsbury

I am happy to agree with the first part of my hon. Friend's question. As he knows, were we to embark upon a discussion of the second part of his question, it is possible that we would not find ourselves entirely in agreement and we would certainly take up much of the House's time.

Mr. Robert Ainsworth

Does the Minister recognise that the price of commodities to manufacturers is now tip more than 8 per cent., that that is a direct result of what happened in September and that we are in grave danger of going around the cycle again? When will the Government bring forward a policy for the long-term development and protection of our trade and manufacturing industry? That will be the only way out of the stop-go cycle.

Mr. Sainsbury

It sounds as though the hon. Gentleman is calling for not only regulation of trade but protection, or higher tariffs, against imports into this country, which of course would be an invitation to a trade war—just the thing in 1929 to 1931 reduced world trade by 40 per cent. and, as a consequence, reduced world output of manufactured goods by 30 per cent. That seems to be a more than usually stupid policy to be proposed, even by the Opposition.