Inflation (Hansard, 15 June 1995)

§ 5. Mr. Clappison
To ask the Chancellor of the Exchequer what representations he has received concerning the control of inflation. [27036]

§ Mr. Kenneth Clarke
I have received many representations about the control of inflation. These reinforce my commitment to our objective of permanently low inflation.

§ Mr. Clappison
Is my right hon. and learned Friend aware that consumers and business men in my constituency will welcome the long-term commitment to low inflation that he has given; but when he hears the hon. Member for Dunfermline, East (Mr. Brown), will he exercise just a little caution, bearing in mind not only that the hon. Gentleman will not say what his inflation target is but that the one policy he does have—the introduction of a minimum wage—would cause inflation of its own accord, and that the last time the Labour party held office, inflation moved within a range of between 7 per cent. and 27 per cent. per year?

§ Mr. Clarke
My hon. Friend does well to remind us of the record. The fact is that the hon. Gentleman does not say whether he would have a higher inflation target for the next Parliament, thereby loosening policy, or whether he would have a lower target, thereby tightening policy. He does not say that he agrees with the Government—which I suspect is the case—because he cannot think of anything else to do. If he indicated anything else, he would have to answer my question about what his views are on interest rates.
879 I do not think that the hon. Gentleman believes in a minimum wage. I do not think that his leader does. This sits in a quite silly fashion compared with the current speeches that they are making about the principles of economic policy. I do not know why they do not stop refusing to put a figure on that. They will not put a figure on anything. Why do they not just drop it and adopt the shadow, at least, of our policy without giving it any substance?

§ Mr. Sheldon
Although the control of inflation must be a prime objective, in what he called his occasionally combative discussions with the Governor of Bank of England, will the Chancellor forcefully point out to him that there are other matters, such as investment and economic growth, that must be considered also?

§ Mr. Clarke
I do not regard low inflation as an aim in itself, and nor does the right hon. Gentleman, but low inflation is an essential precondition to getting prosperity and secure jobs, and the economic success, which other countries, such as Germany and Japan, have enjoyed in the past because they have enjoyed stable economic conditions. That is why the Governor and I are agreed on pursuing the targets that I have set out. The Governor welcomed what I said last night, and I quote: The Chancellor has restated the Government's monetary policy objective—permanently low inflation—quite unambiguously this evening. I very much welcome that. I look forward to continuing to work with the Governor to deliver that low inflation aim.

§ Mr. Brandreth
Does my right hon. and learned Friend agree that among the key groups who welcome low inflation and targeted low inflation are the elderly and the prudent? Does he recognise that in the year, for example, when my own father retired on a fixed income, inflation topped 27 per cent. under the previous Labour Government, and that retired and prudent people today will welcome a governing party that has a firm, precise and deliverable target for low inflation?

§ Mr. Clarke
I agree with my hon. Friend. He echoes the views of what I call middle England, which, for the benefit of Scottish nationalists, is middle Scotland as well. Those people who wish to work and to be responsible for their families, to save and to feel secure in their family finances, need low inflation. The experience of high inflation is that it destroys savings and creates instability in society. It robs the elderly and gives money to the improvident and those who borrow. It is also very destructive for investment and long-term economic prospects. For the past 20 months, we have delivered the best record on inflation that this country has seen since the early 1960s. I set out last night the Government's determination to continue to deliver that.

§ Mr. Ashton
I take it that it is in order to ask a question from the Government crib sheet which has been handed to Conservative Back Benchers and which my hon. Friend the Member for Hemsworth (Mr. Enright) found in a telephone box. Is the Chancellor aware that my constituents would prefer sound economics to soundbites on the management of the economy? Why does the Chancellor have to write down all these soundbites for all the people behind him?

§ Mr. Clarke
The hon. Gentleman has made an extremely good point. I assume that those who are responsible for that are in Conservative central office, and I shall ask them next time to distribute a similar sheet to Opposition Members so that they can find some questions to ask, because the shadow Chancellor of the Exchequer does not have a policy that is worth leaving on a piece of paper in a telephone box and he is giving no guidance whatever to those behind him.

§ Mr. Forman
I preface my question by saying that I have not had a chance to visit a phone box. However, I have a question for my right hon. and learned Friend. Is he aware that his counter-inflation policies have a real test behind them—market credibility? The record shows that the markets believe in that credibility and in that of the Governor of the Bank of England and the aim of getting inflation down and keeping it down. Is not the real contrast between my right hon. and learned Friend's sound policies, which will add to future growth, and those of the Opposition, that his have the ring of clarity whereas those of the hon. Member for Dunfermline, East (Mr. Brown) are surrounded by a number of obscurities?

§ Mr. Clarke
The Governor, in his speech last night, said that we seemed to be on course to see a peak of interest rates in this cycle of about half or less of the peak they reached in the previous cycle. My hon. Friend is right about market expectations on inflation and interest rates, which are coming down steadily as well. That is of real value to business, to investment and to people with mortgages who want to know what might happen to future interest rates. As we deliver, we are building confidence in a sustained recovery with low inflation, and it would be absolute folly to put all that at risk, certainly under pressure from a policy which is not represented by a figure on a piece of paper.

§ Mr. Darling
May I refer the Chancellor again to the private note that he sent to Conservative Members? It is printed on Treasury notepaper and the accompanying note is in the same type face as the Treasury press release. Therefore, it is not just a "piece of paper", as the Chancellor said. When he told Conservatives privately that the inflation target would be met only "most" of the time, was he giving Back Benchers a nod and a wink that he will take risks with inflation if that is needed to try to win the next election for the Conservative party?

§ Mr. Clarke
If the hon. Gentleman is going to get our briefing notes, he might read them and quote them properly. He paraphrases in the most loose and untidy fashion and he got it wrong. The inflation target that is set out in that note is the same as the target set out in my speech—2½ per cent. or below. As I explained in my speech last night, in practice one does not deliver one figure every month: there is fluctuation, sometimes down and sometimes above, but setting policy every month at that target should deliver inflation of between 1 and 4 per cent. The target is 2½ per cent. or less and that is the basis on which I shall set policy month by month when I have discussions with the Governor. It could not be plainer, it is as plain as a pikestaff, and the briefing said nothing different from that. It is the only policy going in this country at the moment. Fortunately, it is delivering considerable success.