Has my right hon. Friend noticed that there is no pay explosion at present, as recent figures have indicated? If there are agreements on phased comparability awards in the public sector, will he be able to consider a cut in interests rates in the near future?
As to the first question, there is certainly no pay explosion. On the other hand, the average of settlements is somewhat above that envisaged in the Government White Paper last year, and in time that is bound to have its effect on prices. On the second question, I am not clear about any necessary relationship between comparability awards and the increase in the minimum lending rate.
I am grateful for the right hon. Gentleman's confidence in my durability in this office. The contents of my Budget this year and next will, of course, include relevant factors, but I do not share the right hon. Gentleman's view that what happens to pay settlements depends wholly on what happens to the money supply. If that were the case, the gross excess in money supply in Germany and Switzerland would have consequences for the inflation rate in those countries, of which there is no sign.
I have said on many occasions, both in this House and elsewhere, that the Government will stick to their fiscal and monetary policy. In recent weeks we have proved our resolve in both these regards, and I think that is one reason for the stability of sterling at the present time.
May I underline the point with which the Chancellor last dealt by asking him to confirm his acceptance of the advice of the Governor of the Bank of England today that it would be fatal to accommodate inflationary pay settlements by relaxing either monetary or fiscal policy? In view of the fact that at least two large sections of public sector workers have now received pay settlements of 9 per cent.—plus 7 per cent. for productivity in one case and an unknown sum in the other—does he not recognise that if fiscal policy is to be kept under control it will be essential for him to abandon his plans to increase public spending next year?
I am grateful to the right hon. and learned Gentleman for drawing my attention to the speech made by the Governor of the Bank of England yesterday. I hope that he noted the welcome which the Governor gave to the joint TUC-Government statement yesterday, which was in sharp distinction to the crabbed response of the right hon. Lady and the right hon. and learned Gentleman on television last night. As to pay settlements and fiscal policy, I have made it clear on many occasions—indeed, I did so a moment ago—that the Government intend to stick to their fiscal and monetary policy. We have proved our will and ability to do so.