HL Deb 28 January 1980 vol 404 cc599-602

My Lords, I beg leave to ask the Question which stands in my name on the Order paper.

The Question was as follows:

To ask Her Majesty's Government whether they are aware that it is reliably estimated that their policies, which they say give first priority to the control of inflation, will add per cent. to price increases from mid-1979 to mid-1980 and will account for nearly one half the rate of inflation.


No, my Lords. The figure to which the noble Lord refers is not correct. Some of the figures used are open to question and the method adopted is conceptually wrong. Measures designed to reduce the rate of inflation may have an apparent effect on the retail price index, but it is an error to add these apparent effects together and claim that that is the effect on inflation of the measures taken. The true position is quite different. The measures the Government are taking are designed to bring the rate of inflation down and will do so.

Several noble Lords



My Lords, first of all I thank the Minister for his Answer. It at least gives me the opportunity of asking supplementaries. Is the Minister aware that the economists concerned are experienced in forecasting, that they use the Treasury computer forecasting model, and that they published the make-up of their 8½ per cent. in the Guardian on 2nd January? Is he further aware that Government-inspired inflation is taken into account when wages settlements are made, and that consequently Government-inspired inflation does not last only one year but it feeds inflation in successive years through the free collective bargaining, which is another policy of the Government?


My Lords, I am obliged to the noble Lord for his opening sentence. I am well aware of the standing and reputation of the people who produced these estimates, but I do not think that they would lay any claim to papal infallibility and, a fortiori, the noble Lord. So far as the second part of his question is concerned, it is relevant to bear in mind that at the same time as indirect taxation was increased in the last Budget there were very sizeable reductions in personal taxation at all levels, and these reductions ought to be taken into account in the process of wage bargaining.


My Lords, could the Minister honestly say whether he understood his own Answer?


Yes, my Lords, and on some suitable occasion I would always be prepared to give the noble Lord some tuition in elementary economics.


My Lords, is the Minister aware that it is now becoming quite apparent where Government policy is leading us? In the short term it is feeding inflation, in the middle term it is going to cause hardship by unnecessary unemployment and unnecessary bankruptcy, and in the long term it is going to give us the most Left-Wing Government we have ever had in this country.


My Lords, I entirely share the noble Lord's sentiment in deploring Left-Wing Governments of all complexions, but so far as the rest of his question is concerned I do not agree with him on any point. It may be well within his recollection that one of the major causes of the present inflation was the high level of the public sector borrowing requirement and the excessive growth in the money supply created by the Labour Administration. Dealing with these matters inevitably involves taking measures which are unpleasant, but it is essential to take those measures if we are to restore the economy to full health.


My Lords, does the Minister's enthusiasm for Right-Wing Governments, at least by implication, carry him as far as having been enthusiastically in support at the time of the policies of Messrs. Barber and Heath, which are the root cause of this country's economic difficulties?


My Lords, the noble Lord's question seemed to me to be interesting but not directly related to the one on the Order Paper.


My Lords, it paralleled the Minister's reply.


My Lords, is the Minister aware that by 1978 the last Government had got the inflation rate down to something under 8 per cent.?


My Lords, I am well aware of the fact that under pressure from the IMF in the year 1977–78 the Labour Government were following a path of much greater fiscal and monetary prudence. Unfortunately, in the following year, under pressure of electoral considerations and dissension within their own party, they allowed public expenditure to get out of control, and this was the proximate cause of our present difficulties.


My Lords, would the Minister tell the House what kind of pressure would be effective upon the Government to produce a change of course, and a less fallible policy than is now being conducted by them?


My Lords, while I entirely appreciate the sentiments expressed by the noble and learned Lord, the Government's policy is clear and consistent, and we believe it is the only effective way of dealing with the very great problems we face.


My Lords, did not the noble Lord himself lay claim to papal infallibility when he stated quite firmly that his Government's policy will work?


That is not a claim to papal infallibility, my Lords. Any Government must have faith in their policy and we have great faith in ours.


My Lords, the Minister referred to the reductions in indirect taxation and the fact that they should be taken into account in relation to wage claims. Is he aware that £1,560 million of these reductions in taxation were given to people with incomes over £10,000 a year, most of whom do not work for weekly wages?


My Lords, the reductions in direct taxation made by the present Government benefited people at all income levels. They resulted in a substantial rise in the threshold at which income tax liability commences, an increase which was double the figure prescribed in the existing legislation and double the figure included in the Labour Party's first Finance Act of 1979. There were also reductions in the basic rate of income tax as well as reductions higher up the scale.


My Lords, is the noble Lord aware that, while my noble friend Lord Murray of Gravesend is, I am sure, deeply grateful for the offer of the lecture which the Minister made to him, the House in general would appreciate more the lectures which we regularly receive from the noble Lord if they were accompanied by more generosity of spirit and a lot more humour?

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