Inflation Rate (Hansard, 3 July 1990)

§ The Parliamentary Under-Secretary of State, Department of Employment (Lord Strathclyde)
My Lords, the all-items RPI inflation rate was 9.7 per cent. in May. Underlying inflation, as measured by the RPI excluding mortgage interest payments and the community charge, was 7 per cent.

§ Lord Dormand of Easington
My Lords, is the Minister aware that the figure he has just given, which was achieved—I do not know whether that is the right word—after 11 years of unbridled power, demonstrates more than anything else the sheer incompetence of this Government, particularly as they have stated so often that their main objective is to achieve low inflation? Is it not now evident that one result of high inflation and high interest rates is increasing unemployment? What are the Government doing to counteract that effect?

§ Lord Strathclyde
My Lords, I find it strange that noble Lords opposite occasionally try to lecture us on economic management and on the inflation rate. The most recent increase in the rate of inflation is due to large increases in the community charge, which added 1 per cent. to the RPI inflation rate from April. As for unemployment, we have seen a record fall during the course of the past few years and we hope that that will continue.

§ Lord Boyd-Carpenter
My Lords, is not one of the factors that has helped to generate inflation the excessive wage demands which the Government have had to deal with? Will my noble friend confirm that Her Majesty's Government intend to be resolute in resisting those?

§ Lord Strathclyde
My Lords, pay is generally decided between managers and their employees. On the matter of government pay, we always insist on moderation and that pay settlements must be earned.

§ Lord Barnett
My Lords, does the Minister realise that he gave a very interesting answer just now? Is it the Government's policy to use underlying interest rates for the purposes of calculating when the time is right to join the exchange rate mechanism?

§ Lord Strathclyde
No, my Lords. We have always said that we would join the European monetary system when the time was right. We have continued to say that one of the conditions that must be met before we can join the mechanism is for us to have a lower inflation rate.

§ Lord Hailsham of Saint Marylebone
My Lords, is it not a mistake to use Question Time for a general economic debate? Is not the purpose of oral Questions to obtain information?

§ Lord Ezra
My Lords, on the basis of getting a bit of information, in view of the recent speech of the Chancellor of the Exchequer to financial institutions is it now the intention to use some form of credit limitation to try to reduce inflation?

§ Lord Strathclyde
No, my Lords.

Lord Bruce of Donington
My Lords, is the noble Lord aware that he should be extremely grateful for the instruction which we on this side of the House endeavour to give him from time to time? Is he further aware that for at least a quarter of the population on low incomes the inflation rate is not 9.7 per cent. but 11.3 per cent? Will he take that into account? It is the poor who pay.

§ Lord Strathclyde
My Lords, I am always delighted to listen to the words of the noble Lord, Lord Bruce of Donington. However, perhaps I may remind him that in August 1986 the inflation rate was nearly 27 per cent. That did not do very much to help the worst off in our society.

Lord Bruce of Donington
My Lords, is the noble Lord further aware that his own Government shoved the rate of inflation up to 22 per cent. within 18 months of taking office?

§ Lord Strathclyde
My Lords, that was largely caused by the state of the economy that was left to us by the party of the noble Lord.

§ Lord Tordoff
My Lords, is the noble Lord aware that in exchanging numbers in this way he may have gone slightly adrift? When he referred to 1986, he may have meant to say 1976.

§ Lord Strathclyde
My Lords, I stand corrected. I meant August 1976, but that was a long time ago.

§ Lord Stoddart of Swindon
My Lords, I would not presume to lecture the noble Lord on this Government's economic policy. Nevertheless, will he confirm that in spite of the Government's policy, which is to reduce demand and to reduce inflation, last month the retail sales figure went up by 1.4 per cent. as did borrowing for consumption? Does that not mean that the Government's policy is simply not working, will not work and will end in disaster?

§ Lord Strathclyde
No, my Lords. We still feel that inflation will come down to around 5 per cent. within the course of next year. We do not look just at retail sales figures but also at house prices and a whole host of other indexes.

§ Lord Grimond
My Lords, is not the noble Lord, Lord Boyd-Carpenter, perfectly right in saying that one major factor in inflation is excessive wage demands? However, do not these wage demands start at the top? Will the Government come clean and say that they are opposed to 80 and 90 per cent. increases in salaries or wages, whoever claims them?

§ Lord Strathclyde
My Lords, we have always made clear that pay in the private sector has to be decided between managers, directors, shareholders and employees. It is not for the Government to dictate wage increases.

§ Viscount Caldecote
My Lords, does my noble friend agree that recent improvements in our balance of trade in manufactured products indicates that the Government's policy is working and that it is a very important factor in controlling inflation?

§ Lord Strathclyde
My Lords, there are certainly signs of a resurgence in exports.

§ Lord Dormand of Easington
My Lords, in view of the answer the Minister gave me it is clear that the Government need lectures from someone. Is the noble Lord aware that the community charge, which he mentioned, was introduced by the Government? Is he also aware that the Government are responsible for increases in the price of electricity and water? It is true that unemployment has decreased in the last few years, but not in the last four months which were the subject of my Question. Will he now deal with that point?

§ Lord Strathclyde
My Lords, the money raised by the community charge as compared with rates has increased by some 34 per cent. That has nothing to do with the Government and everything to do with local authorities. The noble Lord mentioned unemployment over the past four months. There has been a very slight increase in the number of unemployed. That is largely due to high wage settlements. We hope that there will be pay moderation—we have always argued for that—and that in the long term that will reduce unemployment.