Inflation (Hansard, 13 March 1989)

§ The Parliamentary Under-Secretary of State, Department of Transport (Lord Brabazon of Tara)
My Lords, yes.

§ Lord Grimond
One might say that hope springs eternal in the Government's breast, my Lords. Do they recall the far off day when they announced that their success in stopping inflation would be the judge and jury of their economic policy? Are they also aware that since then, the pound has fallen to about half its value and that according to a poll today the majority of people in this country believe that the Government will never stop inflation? Do they agree that they at least need some new policies if they still intend to stop inflation?

§ Lord Brabazon of Tara
My Lords, I can only reaffirm that it remains our policy to stop inflation. As for new policies, I believe that, given time, the tight monetary and high interest rate policies currently being pursued will bear down on inflation.

§ Lord Jay
My Lords, have the Government's present anti-inflation policies achieved the results that they intended?

§ Lord Brabazon of Tara
My Lords, the policy of high interest rates obviously takes a little time to work through the system. It is hoped that such policies will effectively reduce the rate of inflation. Even outside forecasters all appear to think that inflation will fall during this year.

Lord Paget of Northampton
My Lords, is it not true that, on the rare occasions when we have not had inflation, the population has had falling prices and misery? Does the noble Lord agree that the only time we have been happy is when we have had a comfortable and reasonably high rate of inflation upon which depends the prosperity of our industries and the happiness of our people?

§ Lord Brabazon of Tara
My Lords, I am afraid that I cannot agree with the noble Lord at all. There may be the illusion with inflation that people are enjoying high salaries or wage rises, but when they work out what it does to savings and other such matters they see that it is very damaging.

Lord Bruce of Donington
My Lords,as regards these matters taking time, does the Minister agree that there is most certainly a precedent for the rate of inflation doubling within some six or seven months? Is he aware that the present Government inherited an inflation rate of 10.3 per cent. and that within eight months it rose to 22 per cent. and took three years to come down to the rate that they inherited? In view of that, does the Minister believe that the policy of high interest rates is the real answer to the problem?

§ Lord Brabazon of Tara
My Lords, the noble Lord compares the present position with that under the previous Government. I simply remind the House that the present rate of inflation in this country is less than half that enjoyed as an average under the Labour Government between 1974 and 1979. The noble Lord says that inflation rose during the first year or so of this Government's term of office but that rise followed the tax changes which increased VAT and reduced income tax. If he looks at the tax and prices index for that period rather than the RPI, he will see a different picture.

Lord Bruce of Donington
My Lords, is the noble Lord aware that in addition to the doubling of VAT the Government also ensured that interest rates rose from 12 per cent. to 17.5 per cent. and that extra surcharges were put on gas and elecricity?

§ Lord Brabazon of Tara
My Lords, I fully recognise that when the Government came to power in 1979 various radical measures had to be taken to halt the decline from which we had been suffering in the previous five years.

§ Lord Hailsham of Saint Marylebone
My Lords, taking a rather longer view, is it not the fact that since about 3000 BC the value of money has been slowly running down like a clock?

§ Lord Brabazon of Tara
My Lords, I am sure that my noble and learned friend is right. We should nevertheless like to achieve a situation where the value of money runs down the very minimum amount—if possible, not at all.