HC Deb 18 June 1997 vol 296 cc231-3W
Mr. Mitchell

To ask the Chancellor of the Exchequer what factors underlie his target of no more than 2.5 per cent. inflation. [3232]

Mrs. Liddell

The Government's inflation target is 2½ per cent. Price stability is an essential precondition for the Government's objectives of high and sustainable levels of growth and employment.

Mr. Maples

To ask the Chancellor of the Exchequer what is the Government's policy for controlling inflation. [3246]

Mrs. Liddell

My right hon. Friend the Chancellor set out the Government's policy for controlling inflation in his statement to the House of 12 June and in his Mansion House speech of 12 June.

Mrs. May

To ask the Chancellor of the Exchequer what steps the Government have taken to agree a standard definition of inflation for use throughout the European Union; and when he plans to introduce such a definition for use. [3541]

Mrs. Liddell

Eurostat (the statistical office of the European Communities) has been publishing annual inflation rates based on the Harmonised Index of Consumer Prices (HICP) since March 1997. The HICP has been designed expressly for comparisons of consumer price indices across all the European Union member states, although the Retail Prices Index (RPI) remains the best indicator of UK consumer price inflation. The Office for National Statistics has been closely involved in developing the specification of the HICP.

Mr. Jack

To ask the Chancellor of the Exchequer if he will make a statement on the methodology he will employ to determine his inflation target in future years; and if he will give details of each of the economic indicators he will be monitoring prior to making such a judgment. [3365]

Mrs. Liddell

The Chancellor set out his inflation target in the remit to the Bank of England's Monetary Policy Committee. A copy of the remit and background notes can be obtained from the House of Commons Library. In the Mansion House speech the Chancellor said that if the Government succeeded in strengthening the ability of the British economy to sustain growth with low inflation, and if international conditions permit, he would hope to lower the inflation target.

Mr. Luff

To ask the Chancellor of the Exchequer at what intervals he intends to review the inflation target; and if he will make a statement. [3549]

Mrs. Liddell

The inflation target will be confirmed in each Budget. In his Mansion House speech the Chancellor said that if the Government succeeded in strengthening the ability of the UK economy to sustain growth with low inflation, and if international conditions permit, he would hope to lower the inflation target.

Mr. Tyrie

To ask the Chancellor of the Exchequer what assessment he has made of the economic benefits derived from a long run inflation rate of 2½ per cent. which a rate of inflation of 1½ per cent. or less would not deliver. [4184]

Mrs. Liddell

Low inflation is an essential pre-condition for high and stable levels of growth and employment. The evidence suggests that higher inflation rates bring no long-run benefits, and are likely to involve long-term costs.

Mr. Mitchell

To ask the Chancellor of the Exchequer further to his instruction to the Bank of England to pursue an inflation target of 2.5 per cent., in which stages of the economic cycle an inflation rate of 2.5 per cent. is compatible with(a) a rise and (b) a fall in unemployment. [4037]

Mrs. Liddell

The remit for the Monetary Policy Committee and background notes can be obtained from the House of Commons Library.

Mr. Mitchell

To ask the Chancellor of the Exchequer if he will list the rate of inflation at the time of each increase in interest rates in the last three years and the projected figures for inflation on each date for one year ahead. [3230]

Mrs. Liddell

The table lists the latest available inflation figures and latest published Treasury forecast for inflation for retail prices excluding mortgage interest payments (RPIX), at the time of each increase in interest rates over the last three years.

One year ahead forecast
Date Size of base rate increase (percentage point) New base rate (percentage) Latest published inflation rate (RPIX) (percentage) Publication1 RPIX Period
12 September 1994 ½ 5.75 2.2 (July 1994) SEF 94 2¾ 95Q4
7 December 1994 ½ 6.25 2.0 (October 1994) FSBR 94 2½ 95Q4
2 February 1995 ½ 6.75 2.5 (December 1994) FSBR 94 2½ 96Q2
30 February 1996 ¼ 6.00 2.9 (September 1994) SEF 96 2¼ 97Q4
6 May 1997 ¼ 6.25 2.7 (March 1997) FSBR 96 2½ 98Q2
6 June 1997 ¼ 6.50 2.5 (April 1997) FSBR 96 2½ 98Q2
1SEF denotes Summer Economic Forecast and FSBR denotes Financial Statement and Budget Report.

Mr. Mitchell

To ask the Chancellor of the Exchequer what research his Department has(a) commissioned and (b) evaluated on the correlation between the independence of the Central Bank and the rate of inflation in different countries over the last 15 years. [3234]

Mrs. Liddell

There have been numerous academic studies of the correlation between central bank independence and inflation, based on different groups of countries and assessed over different time periods.

Mr. Maples

To ask the Chancellor of the Exchequer what indicators he keeps under scrutiny in forming his estimates as to the future rate of inflation. [3248]

Mrs. Liddell

The Chancellor makes a comprehensive assessment of economic developments, taking account of all relevant indicators, in forming a view of inflation prospects. A full forecast for the economy will be published with the Budget on 2 July.