§ Lord Hatch of LusbyMy Lords, I beg leave to ask the Question standing in my name on the Order Paper.
§ The Question was as follows:
§ To ask Her Majesty's Government what have been the comparative rates of inflation over the past 10 years for families on the lowest and highest incomes.
§ Lord Brabazon of TaraMy Lords, official price indices for these groups are not available.
§ Lord Hatch of LusbyMy Lords, I know that the Minister has consulted, as I have, the article in Fiscal Studies of last November. We were talking about it yesterday. Do the Government agree with the general findings of that article and the analysis of the retail price indices that the burden of inflation on the goods generally bought by the poorer section of the community is heavier than that on those bought by the top decile of our earners?
§ Lord Brabazon of TaraMy Lords, I have indeed seen the IFS study; not the full study, but a résumé of it. The Government are guided in these matters by the independent Retail Prices Index Advisory Committee, which is a body independent of the Government. That committee has said in the past that no indices for any other special social or income groups should be published. However, I have no doubt that the study has been noted by the committee. As to whether the burden of inflation is greater on the lower decile of income earners, I must point out that the study showed in fact that the difference was very small—only in the region of about one-third of 1 per cent. a year.
§ Lord Harmar-NichollsMy Lords, may I ask my noble friend how you can possibly split the nation into segments when talking about whether inflation is good or bad? Inflation is either good for the nation or bad for the nation. If it is bad for the nation, it is bad for all segments in it. To try, for any reason, to suggest—
§ Lord Harmar-Nicholls—that one segment is against another, is against the best interests of the nation.
§ Lord Brabazon of TaraMy Lords, I quite agree with my noble friend that inflation is bad for the nation. Whether it impinges more heavily on one group or another is, as I have said, very marginal, and it has been the recommendation of the prices index advisory committee that we should only publish the main RPI 230 index in addition to the RPI index that we publish for pensioners.
Lord Bruce of DoningtonMy Lords, is the noble Lord aware that he has already admitted to the House that he has studied the results put out by the Institute of Fiscal Studies on this matter? Will he therefore not agree that the burden of inflation on the lower income groups in the United Kingdom has been significantly greater than that upon the higher income groups? Will he say, when he considers that the difference is only marginal, how small it is, and that even small differences make a very great difference indeed to the poorer sections of our community?
§ Lord Brabazon of TaraMy Lords, no, I would not agree that the burden of inflation has been significantly greater. I have already given the figure quoted in the study, and that works out at one-third of 1 per cent. per year. I do not consider that to be very much.
§ Lord Boyd-CarpenterMy Lords, if the noble Lord, Lord Bruce of Donington, is right, does not that confirm the wisdom of Her Majety's Government in giving first place to combating inflation?
§ Lord Brabazon of TaraMy Lords, my noble friend is absolutley right. I would go on to say that regarding the up-rating of pensions, in the past year alone pensions have risen by 2 per cent. more than inflation.
Lord Paget of NorthamptonMy Lords, is this not really a matter which is more affected by differences in diet than differences in income?
§ Lord Brabazon of TaraMy Lords, the noble Lord is quite right. The main differences are for those people who smoke heavily and drink heavily.
§ Lord Hatch of LusbyMy Lords, the noble Lord the Minister is apparently trying to minimise the difference in the effect of RPI on different sections of the community. Is he aware that according to this study, when the Government claim that the state old-age pension has been increased by 23 per cent., the real figure, if this is weighted by the impact of inflation on pensioners, is 18 per cent? Does this not display a disparity that is a serious social menace? Is he further aware that in this analysis it is proposed in a quite friendly way that the Government might very well monitor the effect of inflation on different sections of the community when determining their social security and pension rates?
§ Lord Brabazon of TaraMy Lords, I think that I have already answered the second part of the question. I have said that the matter is one for the independent advisory committee and they will no doubt have noted this study. If they make any recommendations to the Government as a result of that we shall of course take them into account. With regard to the increase in pensions—I do not have at hand the figures which the noble Lord, Lord Hatch, has quoted—I quote my own figures of a 2 per cent. real increase in the past 12 months. That is based on the retail price index specifically for pensioners. As I said earlier, an index for pensioners is calculated.
§ Lord DiamondMy Lords, does not the pensioners index indicate that there is quite a difference in the effect of inflation on those pensioners who are also by definition within the lowest decile of the figures? Is it not the case that not only does the rate of inflation add a burden onto the lowest income earners or income recipients but also that by the very nature of their reduced means they are not able to avail themselves of the best possible purchasing power as those at the top decile do?
§ Lord Brabazon of TaraMy Lords, the pensioners' index at the moment is running slightly lower than the ordinary RPI. Whether they can or cannot avail themselves of some of the benefits of the higher decile of earnings is not really a matter in the calculation of the index.