Orders of the Day — Cost of Living

Part of the debate – in the House of Commons at 12:00 am on 27th January 1966.

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Photo of Mr Patrick Duffy Mr Patrick Duffy , Colne Valley 12:00 am, 27th January 1966

My hon. Friend makes the point that it seems some hon. Members are anxious to give the impression that prices are going up. But if we look at the prices of food in countries such as France, Germany and Sweden and compare them with those in England, we find that in Paris the French traditionally spend over 50 per cent. of their incomes on the housekeeping budget. On the national radio and television food prices are given, but they are treated as a joke. Germany compares favourably with Britain, but in Sweden as in France prices are astronomical.

I am making a genuine attempt to give a more balanced picture at home as well as abroad, but in trying to do that I have to make reference to the reasons for the spurt which took place in prices in 1965. Hon. Members opposite tried to gloss over the reasons when they were mentioned by my hon. Friend the Member for Huddersfield, West (Mr. Lomas). They seemed unimpressed, but I do not think it can be stressed too often that the reasons for the taxation measures were the consequence of the balance of payments crisis at the end of 1964, and notably the surcharge. When its renewal was debated I opposed it because I want it to be taken off as soon as possible. The remarkable thing is that as a country we have remained so competitive and kept prices so steady, given the surcharge which I intensely dislike.

There is another reason for the spurt in prices during the early part of 1965, namely, the demand inflation, which we also inherited. In some ways I take this more seriously than I do the balance of payments crisis, because when the right hon. Member for Barnet introduced his Budget in 1964, many hon. Members of my party criticised the Budget simply because we thought it was too mildly deflationary, and now, of course, we know that it was. We therefore inherited not merely a balance of payments crisis, but a demand inflation. We now have a cost inflation, and for that we are responsible, but I repeat that we inherited a demand inflation.