I beg to move,
That this House deplores the soaring cost of living which is a direct result of the economic and financial policies of Her Majesty's Government.
It is now admitted by the Government that the year-on-year rate of increase in inflation is over 20 per cent. Indeed, it is admitted by the Government that it is likely to rise even further in the next few months. So, within one year of taking office, the Government, who inherited a rate of inflation of 10 per cent., have doubled the rate.
Our case in this debate is this. First, we have a soaring cost of living. That cannot be denied. It is self-evident. Secondly, this excessive and dangerous level of inflation has been caused largely by deliberate Government policies. Third, at the last election the Conservative Party deceived the electorate into thinking that price increases would be reduced under a Conservative Government.
I remind the House, briefly, of the activities of the Conservative Party during the last election campaign. First, the Conservatives' prices spokesman, the right hon. Member for Gloucester Mrs. Oppenheim)—on the Government Front Bench today as the Minister for Consumer Affairs—was referred to in an article in The Daily Telegraph of 25 April 1979. A correspondent caught very acutely the flavour of the Tory election campaign as developed by the right hon. Lady, who went electioneering in Ealing, North. The correspondent in The Daily Telegraph described how the right hon. Lady attempted to make an impact on what he called " skilled working class wife-type " voters.
He wrote that the right hon. Lady
would come... smiling her celebrity smile and breaking into her patter.
Different people reacted in different ways. Some were clearly preoccupied in trying to guess who she was. Was she in ' Crossroads '? or a hostess on ' The Golden Shot '? Or perhaps a new series of ' Candid Camera ' was being filmed?
I wish that it had been. The report continued:
In such cases a dialogue would ensue rather like that between a ventriloquist and a nervous doll.
' I expect you're finding prices rising all the time,' the Star would say encouragingly.
' Er, yeah,' the consumer would reply.
' I imagine that this means there are lots of things you find it difficult to afford these days.'
' Er, yeah.'
' What for instance? '
' Er, er, er, er...'
' Kitchen towels perhaps? '
' That's right, kitchen towels. '
And as the afternoon progressed, your reporter began to fear that there must be a fairly severe recession in the kitchen towels business—not to mention the clothing, washing-up liquid and tooth-powder industries.
For whenever she mentioned a product, sure enough, the shopper in question couldn't afford it these days. It scarcely seemed worthwhile going down to the shops.
To make her point more dramatically "—and this will reawaken memories among my hon. Friends—
Mrs. Oppenheim was carrying two baskets of unequal size. One, overflowing with loaves, fish fingers, tinned fruit and the Big Economy Packet of breakfast cereal, represented what a Tory 1974 pound would buy.
The other, which contained a few odds and ends and the tiny Economy Size of breakfast cereal, showed what the Socialist pound of today was reduced to.
But this caused an unexpected diversion. A local Tory baker rushed in wanting to substitute his own crusty loaf for the mass-produced, sliced product in the specimen baskets.
' But I have to use this standard controlled loaf,' explained Mrs. Oppenheim diplomatically. 'It has to be a fair comparison to show that you can't get value for money under Labour.'
' You can in my shop," replied the baker
Those of us who remember these activities of the right hon. Lady, which were captured very accurately by the correspondent who wrote the article, will wonder—and have been wondering increasingly over the last 12 months—
what happened to the right hon. Lady's two shopping baskets. Some of us had a certain affection for them as they were trotted out up and down the country. But we have heard not a thing from the right hon. Lady about prices under the Conservative Government now that she has some responsibility for them.
I also remind the House that the Labour Party constantly warned the public of the price increases which would occur under a Conservative Government. The reaction that we got from the Conservative Party was one of constant denials. For example, in The Daily Telegraph, of the following day, 25 April, there was a headline
Thatcher denounces school milk and VAT 'scares '.
That was a denial from the now Prime Minister that there would be a doubling of VAT, and a denial—if one can believe it—that 10p would be added to the cost of school meals—10p!
I might add, for good measure, the Prime Minister's denial on another occasion that prescription charges would be drastically increased under a Conservative Government.
But perhaps the most interesting denial of the many uttered during the election campaign came from the present Chancellor of the Exchequer. My hon. Friends will remember that during the election campaign, Mrs. Shirley Williams produced figures to show what would be the increase in the cost of living if VAT were increased from its then level of 8 per cent. to its present level of 15 per cent. This drew an immediate and angry denial from the right hon. and learned Gentleman, the present Chancellor of the Exchequer. He said that the figures that Mrs. Williams had used at that morning's Labour press conference had no basis in reality. He went on to say
It is high time Labour stopped spreading scares about our policy ".
Then, amazingly enough, he said of Mrs. Williams:
She was assuming that VAT goes up to 15 per cent.
However, in his first Budget the right hon. and learned Gentleman put VAT up to 15 per cent. Who was spreading scares about Tory policy? Did not the Labour Party predict accurately and precisely the
consequences of electing a Conservative Government?
We know of the equivocations in which the right hon. Lady and others indulged on the future of the Price Commission. They said that it would be reviewed but certainly not abolished. Yet, within a few days, the Prime Minister, during the debate on the Queen's Speech, committed the Government to abolishing the Price Commission. It was carried out by the passing of the Competition Bill. Not only does the House know better, now that the Government have been in office for 12 months, but the public know better. How many people would have voted Conservative had they known that, within 12 months, inflation would be at 20 per cent. and mortgages at 15 per cent.?
Let us consider how Government policies have contributed to our soaring cost of living. In his first Budget the Chancellor of the Exchequer recklessly and foolishly doubled the rate of value added tax. At one stroke he added four points to the retail price index. He made ritual and hollow references to the need to control inflation and promptly embarked upon policies, through the doubling of VAT and other increases, which set off another vicious upward twist to the prices spiral. Hardly any economic commentator does not agree that the VAT decision was the important impetus to the soaring cost of living and the rising inflation from which we now suffer.
At that time the theme of the Government and the Chancellor was the incentive of tax cutting. We hear precious little these days about incentives, either for individuals or companies. The truth is that Tory policies—taking income tax cuts into account as well as increases in mortgage rates and all the other increases—have left most individuals much worse off than they were prior to the Conservatives being elected. Only the very well-off gain hugely from the tax cuts at the top of the scale. The rest of us are left to pay the costs of the Chancellor's folly. It was a " Smart Alec " Budget. If the Government's principal aim was to comtrol inflation, which they now say is their objective, the Chancellor should not have touched VAT but should have concentrated on holding down the cost of living.
Since that Budget the Government have deliberately forced up a wide range of prices. The energy industries are an example. Believe it or not, the Government's policy is to force up gas prices to 10 per cent. above the excessive rate of inflation from which we now suffer. Within a year, gas prices will increase by 29 per cent. and electricity prices by 20 per cent.
Mortgage rates are at the record level of 15 per cent. That has enormous consequences for family budgets. As each further cut in public expenditure is made, rents and rates for most of our people will be pushed up. It is not just a case of the Government failing to act to influence the level of inflation. They are deliberately causing price increases by their policies, particularly in the financing of the publicly owned industries such as energy and transport. The cuts in those industries will be passed on in increased costs and fares.
Not all price increases are the responsibility of the Government. Increases in the price of oil, for example, are bound to be reflected in domestic inflation, although I did not notice much appreciation of that in Conservative criticism of the last Labour Government. Our case is that the Government have needlessly and recklessly poured fuel on the fires of inflation by their policies.
What do they promise for the future? Apparently the Government adhere through thick and thin to only one policy—the famous control of the money supply. Confidence in that policy seems to waver from time to time on the Government Benches. There are a number of sceptics on the Government Back Benches, and sometimes the rot spreads to the Front Bench. We read with interest the recent speech by the Chief Secretary to the Treasury. He was the man who, a few weeks ago, promised us three to 10 years of austerity. Now we know that there is no mechanistic connection between the control of the money supply and the rate of domestic inflation. The right hon. Gentleman is waiting for a swallow and a summer. He says that one swallow might not presage a summer. Perhaps there is not even a mechanistic connection between swallows and summers.
The Prime Minister says that everything will be all right but that there is an 18-month time lag. Unfortunately, the Chief Secretary forgot about that in his speech. He told us that there would be a time lag of, perhaps, three years. There are many variables and other difficulties in the way of the Government. Some of the variables are becoming in-finately variable.
A commentator in the Financial Times, who is known to be sympathetic to the general trend of Government policies, said that even if Government policies could be made to stick for the control of the money supply—and there is some doubt about that—the 12 monthly increase in inflation would still be in the low teens in 1982, two years ahead. We shall see.
Even if inflation is reduced a little by the policies to which the Government are committed, the cost to our industrial and economic development and standards of living will be catastrophic. Damage has already been done to our industry by a combination of high exchange rates and a 17 per cent. minimum lending rate. Appalling predictions were made in the Red Book, published at the time of the Budget. A drop in output in manufacturing industry will take place in the next three or four years. The commonly and widely held view of economic commentators is that unemployment cannot fail to reach 2,250,000 in the next two or three years. Many of our poorest fellow citizens know all too well of the appalling damage to our public services caused by the Government's cuts in financing.
Our indictment is a double one. First, Government policies have caused our soaring cost of living. Second, and perhaps even worse, the only policies that they propose to remedy the situation will cause incalculable damage to industry, jobs and the public services. That is why, above all, we call upon the House to support the motion.
Unfortunately only Members of the House will be able to express their views by their votes. Were the public, only one year after the Tories gained power on a fraudulent prospectus, given the same opportunity to express their views by their votes, this incompetent and tattered Government would be swept from power.
I had hoped that advancing years would bring with them some form of cynicism that would stand one in good stead when the time came. But, honestly, when one looks at the terms of the motion and listens to the right hon. Member for Lanarkshire, North (Mr. Smith), one can only marvel at the breathtaking cheek of members of the Labour Party. When they were in government they presided over a rate of price increases of a staggering and unprecedented 110 per cent., including no fewer than 83,000 individual grocery price increases. Yet they presume today to lecture this Government about rising prices. The right hon. Gentleman was a member of the Government who were responsible for that gruesome record. For him to attempt to tell this Government what they should be doing about inflation is like Jack the Ripper lecturing the police academy on the prevention of crimes of violence.
I do not wish to be harsh on the right hon. Gentleman, because he has many pleasant qualities in debate. If those pleasant qualities are added to my charitable nature, I shall resist the temptation to accuse the right hon. Gentleman of hypocrisy. Selective amnesia would more aptly describe the right hon. Gentleman's stance. He itemised ways in which, as he claimed, the Government's policies have deliberately put up prices. Does his memory serve him so ill that he has forgotten all the specific steps that his Government took, with his support, to increase prices during their period of office? I cannot deal with each and every one of those in a debate as curtailed as this will be.
The right hon. Gentleman spoke about school meal prices. Did he vote, for example, against the 108 per cent. increase in school meal charges imposed by his Government during their period of office? Of course he did not. He supported it. Did he vote against the measures in successive Budgets under his Government that added almost 10 per cent. to the retail price index? Of course he did not, He supported them. Did he oppose the economic policies of his Government that led directly to the fall in the value of the pound, adding about 10 per cent. to the retail price index during their period of office? Of course he did not. He supported them.
The right hon. Gentleman neither opposed nor criticised any of the measures taken by his Government which added over 20 per cent. to the retail price index and at the same time put 5p on the standard rate of income tax. Nor did the majority of his right hon. or hon. Friends oppose those measures, any more than they criticised or opposed their Government's disastrous economic policies—their over-spending and over-borrowing, which fuelled the fires of inflation that we are now attempting to extinguish.
The simply truth is that if the right hon. Gentleman's Government had had the courage and the honesty to face the realities as we are facing them today, and if they had not squandered precious time and resources for political gain—let alone paying the bills—we would not be facing the current unacceptably high rate of inflation today, about which he has the gall to complain.
That was not their way. Their way was to embark on a succession of so-called prices policies aimed at hiding inflation in the short term, instead of curing it. Those policies were not only futile, but were expensive and damaging, and they cruelly misled people into believing that inflation was being tackled, instead of merely being disguised and delayed. They embarked on legislation such as the Price Commission Act, which cost £7½ million, to restrain the retail price index by a derisory one-tenth of 1 per cent. The right hon. Gentleman made no mention of the Price Commission. [HON. MEMBERS ]: " He did."]
If the right hon. Gentleman referred to it, he referred to it merely en passant, yet it was supposed to be central to the previous Government's policy. It was typical of the cosmetic policies adopted by his Government—policies that were a perfect example of attempting to prevent inflation by means of trying to stop a haemorrhage with sticking plaster.
As the right hon. Gentleman told us this afternoon, he is still advocating the same stale and failed prescription that he followed in government. It was the fatal combination of those cosmetic prices policies, together with the profligate econonomic policies of his Government, which resulted in the worst record on prices for 300 years. Unfortunately, although he will not be prepared to accept it, the evil that men do lives on after them. The lingering consequences of those policies caused a substantial part of the inflation for which he is attempting to blame us today.
Part of the paucity of the right hon. Gentleman's case was emphasised by the fact that he spent a full four minutes reading from an amusing article in The Daily Telegraph which, incidentally, contained not one quotation from me promising any quick or easy solutions for the soaring rate of inflation which I said we were bound to inherit. Among other things, he mentioned the increases in gas prices, but he did not mention the increase of 10 per cent. in gas prices imposed by his Government. Of course we accept that the current rate of inflation is far too high——
Did not the Conservative Party, during the general election campaign, give the impression that it would reduce the rate of inflation, which then stood at 10 per cent? It has doubled in the last 12 months. The Government have increased prescription charges from 40p to £1—which they said they would not do. VAT was increased from 8 per cent. to 15 per cent. There has been a whole range of increases. The Government have taken measures in the last 12 months which are the reverse of what they told the electorate they would do.
The hon. Member must not be over-encouraged by my announcement during the Committee stage of the Competition Bill that he had a way with me and try to interrupt now. I made no such prediction. The only prediction that I made during the general election campaign was that there would be no quick and easy way of containing inflation. I said that if a Labour Government were returned to power inflation would go higher as a result of their policies.
I agree with the right hon. Member for Lanarkshire, North that the current rate of inflation is far too high. I accept, as he says, and as my right hon. Friend the Prime Minister and my right hon. and learned Friend the Chancellor have said, that it will, unfortunately, go higher before it starts to go down later in the year. It is the Government's overriding priority, through all our economic policies, and through the stimulation of competition, to overcome inflation, to bring it down to a tolerable level and to keep it there.
The restoration of a sound economy is fundamental to the defeat of inflation. We heard very little about economic policy from the right hon. Gentleman—in contrast to the motion before the House. That is why we are resolutely tackling the daunting and deep-seated problems that we inherited, and we shall continue to do so until they are resolved.
I remind the House of the magnitude of the task and of our daunting inheritance. We inherited from the Labour Government accelerating inflation, accelerating raw material costs, accelerating pay settlements, and an acceleration in the money supply. In their last year in office the Labour Government were printing money at twice the level of inflation. We inherited a hugely swollen public sector borrowing requirement, a deteriorating balance of payments and low productivity. Not only did oil prices—as the right hon. Gentleman acknowledged—almost double last year, but commodity prices, exclusive of oil, have risen by almost 10 per cent. during our period of office. In comparison, under the previous Government, commodity prices rose on average by less than 2 per cent. a year. The right hon. Gentleman neglected to mention those factors. I am sure that it was not his intention to mislead the House. It was probably an oversight.
The right hon. Gentleman was strangely silent about rate increases, which weigh so heavily on many families struggling to make ends meet. Why was he so silent about rate increases? Was it perhaps because the increases are highest in the spendthrift Labour-controlled authorities—averaging 41 per cent. in 31 London boroughs? Over the past five years the average has been well over 100 per cent. in Sheffield. Of course, it was an oversight on the right hon. Gentleman's part that led him not to mention rate increases.
All these factors have contributed substantially to the current rate of inflation. If the Govenment had not embarked quickly and resolutely on the necessary measures—cuts in public expenditure, restraint of the money supply and a number of other unpalatable but necessary measures—inflation would have been even higher today. If we had embarked on the levels of expenditure that the Opposition have been pressing on us continuously over the past year, we would have had hyper-inflation, hyper-taxation and a drastically devalued pound.
Without a strong pound, which the right hon. Gentleman criticised, prices would rise even more and import prices would be pushed even higher. The strong pound has benefited every consumer. It is substantial evidence of confidence in our domestic policies. The Labour Party has characteristically denounced the welcome relief from inflation that has been brought about by a strong pound. Worse still, and paradoxically in the light of the motion before the House, it has gone so far as to call for the deliberate creation of inflation to reduce the value of the pound.
It is all there in the words of the former Financial Secretary to the Treasury during the debate on the Budget on 1 April. The right hon. Gentleman repeated his astonishing proposal at Prime Minister's Question Time this afternoon. I remind the House of the words of the Leader of the Opposition when he was Prime Minister. He said:
it is important to maintain the stability of our currency. The increase in interest rates is, partly, a protection for that purpose. That will help to keep down inflations."—[Official Report, 8 February 1979; Vol. 962, c. 556.]
Where was his right hon. Friend the former Financial Secretary? Let the House remember that the minimum lending rate at the time was 15 per cent.
If we have the advantages of a high exchange rate that the right hon. Lady claims, surely it is even more staggering that the Government have increased the rate of inflation to 20 per cent. Will she kindly explain at some stage how increasing the rate of VAT from 8 per cent. to 15 per cent. helped to bring down the rate of inflation?
First and foremost, the rate of inflation would have been a good deal higher if the exchange rate had not been so strong. I shall answer the right hon. Gentleman's question about VAT rates when he tells the House why the Labour Party wants a weak pound and higher inflation. How will that benefit consumers?
The right hon. lady has not explained how, in spite of the advantages of a strong pound, the inflation rate has doubled. She tells us that that has nothing to do with Government policy, which I find hard to believe. Perhaps she will explain a simple matter that relates to the strong pound. Why is it that her right hon. Friend the Minister of Agriculture, Fisheries and Food said today that monetary compensatory amounts are to be adjusted, so that the benefits of a strong pound for food in the European Community are to be thrown away by the Government?
My right hon. Friend said nothing of the sort. The hon. Gentleman is wrong on two counts—[Interruption.] I have given the House specific details of why the rate of inflation is so high despite the strong pound, without which the rate would be even higher. I shall repeat the reasons—the accelerating increase of the money supply that we inherited from the previous Labour Government, accelerating pay increases that we inherited from the Labour Government, accelerating inflation that we inherited from the Labour Government, accelerating raw material prices—[Interruption.]
Order. I have been tolerant. It is not the custom of the House for hon. Members to remain seated and shout across the Chamber. It is unfair on those who are speaking. If hon. Members wish to intervene, will they please stand up and ask whether they might do so?
I think that I have given the House adequate reasons why the rate of inflation is so high despite the strength of the pound, without which it would be very much higher. I hope that Labour Members are ashamed of the fact that they have been calling for additional inflation by urging the Government to devalue the pound and so impose on consumers unnecessary burdens and unnecessary inflationary pressures.
So great is the concern of the Labour Party about inflation that it does not really care about these matters. The truth is that Labour Members have neither a monopoly of concern about inflation and rising prices, nor the solutions. We are more concerned than they are about rising prices. The difference between the Opposition and the Government is that the Government's concern did not start on 3 May 1979. Our approach is fundamentally different from theirs. It is to tackle the root causes of inflation to prevent it from happening in the first place, instead of merely trying to disguise it once it has already happened.
The problems that have to be tackled and overcome will not easily or quickly be resolved. We have never promised that they would.
Order. I have already indicated that it is not customary for hon. Members to be seated and shout across the Chamber. It is certainly not customary to speak from the Cross Benches, as the hon. Member for Carlisle (Mr. Lewis) is doing.
The root cause of the inflation that is with us today is excessive growth in the money supply—started by the previous Labour Government, and in real earnings at a time of static productivity. The former cause is already being brought under control. It is essential that the latter should follow.
It should be remembered, as my right hon. and learned Friend the Chancellor of the Exchequer pointed out recently, that a substantial element in this year's public sector pay awards is the result of post-dated cheques left by the previous Labour Government—the so-called catching up settlements that inevitably follow several years of rigid pay policy.
If settlements are too high in the private sector, the consequences will be pain- ful for the work forces concerned and for the companies for which they work. The combination of vigorous competition and a tight money policy will make it increasingly difficult for those settlements to be passed on in higher prices.
If public sector settlements continue at such a rate, without any commensurate improvement in efficiency and productivity where that is possible, that can only mean higher prices for everyone. To some extent the new powers in the Competition Act 1980 to examine public sector costs and efficiency will help to expose and remedy inefficiency if and where it exists in the public sector. At the same time, recognition by the work forces concerned of the consequences of excessive pay claims in future is essential.
We are often accused by the Labour Party—once again predictably by the right hon. Gentleman—of putting too much emphasis on monetarism. Personally, I dislike the term. I prefer to call it economic common sense, and we cannot have too much of that. The Government do not claim to have invented such policies, nor are we the first to pursue them. The record of any major industrial company in the Western world leads to a direct correlation between countries with sound economic policies and low rates of inflation, and vice versa. The evidence is there for all to see, and it is no coincidence that the countries with low rates of inflation and strong economies are those that have pursued policies similar to those that we are now pursuing.
We do not have to look abroad for such evidence. Even the previous Labour Government managed to get down inflation while they were following the monetary policies dictated by the International Monetary Fund. West Germany, for example, has had to face the same increases in raw material prices as Britain. It has no North Sea oil, yet it has still managed to contain inflation over the past 10 years to a remarkable extent.
We are determined to restore that kind of economic strength and stability to this country. Part of the treatment, which was rendered inevitable by our inheritance, has and will lead to some higher prices in the short and medium term. Although that is regrettable and painful to many consumers, we believe that it is justified if it will produce in the longer term an effective and enduring cure.
It is a cure that is essential for the economic survival of this country. It is essential if consumers are to be protected from the regularly re-occuring ravages of inflation, from which they have suffered for so long. That cure is the objective of all our policies. We make no apologies for facing those realities or for rejecting the political quackery of the Labour Party. The motion—which I call upon the House to reject—has a hollow ring. It is founded on hypocrisy. It condemns a situation for which the Labour Party is largely responsible. It rejects the constructive and realistic policies that we are following.
The fight against inflation still has to be won. [HON. MEMBERS: " Hear, hear".] A week may be a long time in politics, but a year is not a long time in economics. At last, after five years of economic degradation, we have a policy that can win, and a Government who are determined to see that it does.
Most prices are high and rise steadily under all Governments, because more and more money is claimed and obtained by every interest group in this country, yet with no comparable increase in production. As salaries and wages rise every year, industries and services are bound to try to make some profit by putting up prices. When production is hardly rising, annual pay and salary increases will inevitably lead to inflation. Professor Friedman did not make that discovery. As the Mnister for Consumer Affairs said, it is common sense. It is not a question whether one should control the money supply—of course one should control it. It is a question of how to do it.
One must take into account the amount of wages that may be saved, the velocity of circulation and credit. Prices may increase as a result of an increase in the cost of imported raw materials and oil. However, there is no logical necessity why our oil prices should follow world oil prices. Printing more money is no solution to the higher cost of imported raw materials. Control of the money supply is essential, and will remain essential whatever other policies a Government may pursue. If one has a prices and incomes policy, one will still have to control the money supply.
Another major element in inflation and high prices is the demand for goods and services from those who do not produce. That is one reason why it is essential to reduce the number of bureaucrats, and, even more importantly, we should stop a great deal of unnecessary public expenditure. Even if we get the money supply under control and reduce the dead weight of unproductive demand on our resources, two essentials will remain. First, we must curb the annual and automatic demands of every profession, institution and trade union for more money. Such demands may be made regardless of whether they have made any increased effort. At the back of those demands is the fragmentation of the country into competing bureaucracies which simply look to their own interests. There is an absence of any general will to look to the needs of the country as a whole. It is a moral or political problem, not one of economics.
If we are to assert the general good over competing interests, change must start at the top. At present we are simply chasing one another's tails. If one trade union gets a rise, others feel that they should get one. The Civil Service and other professions then demand "comparability ". The rising spiral goes on. No one will admit that he has enough money or that the need for his particular organisation may have decreased, or that it should economise.
Those who are at the top of the scale should lead the fight against this appalling disease. That is one reason why I believe that it was a mistake to increase the Queen's Civil List. That is why it is wrong to make increases of 20 to 25 per cent. in the salaries of top public servants. In addition, unless those who control our affairs feel the pinch of inflation more sharply, they will have little incentive to reduce it. At present the poorer people suffer most from inflation and from the methods taken to contain it. Many of those at the top, who receive annual increases, index-linked pensions and a great deal of their heating and transport free, are insulated against rising prices. That becomes more true every year.
The Government apparently believe that when considering pay increases there is one law for the well-off and another for the poor and for the workers. That is topsy-turvy and makes confidence in their proclaimed battle against inflation impossible. Let no one say that a small increase for the top bureaucrats makes no difference. There is such a thing as example, a golden rule and a need for those at the top to practise what they preach.
The treatment of the public services has shaken the faith of this country in the Government's ability to tackle inflation. It is essential to award those who do not put in excessive demands. At present, nurses, physiotherapists and others—chiefly women—who do not indulge in restrictive practices or strikes come off worst. The bankers, the highly paid and the most aggressive trade unions are doing quite well out of this Government. The Government must tackle that issue.
The main argument in favour of an incomes policy is that as long as there is no comprehension of the general good it may at least make inflation more tolerable for the weaker members of the community. It can be adjusted to help those most in need and, to some extent, to curb those who have enough.
So-called free collective bargaining has meant that the strongest and most disruptive win. So far incomes policies have not always led to a desirable result. I emphasise that an incomes policy may be necessary in present conditions but that it will not of itself cure inflation. On the contrary, it may make inflation respectable. If the figure is fixed at 10 per cent., everyone may claim that amount and as a result one gets a statutory inflation rate of 10 per cent. However, unless something can be done to curb the runaway increase in prices, we may well come to such a policy.
With 1½ million unemployed and North Sea oil to protect the pound, should we not try the Keynesian formula of increasing investment and of trying to take up the slack in the economy? One objection may be that revenues from the North Sea are grossly mismanaged. When Keynes wrote of investment, he meant productive and needed investment. Today, too much of what passes for investment is either a contribution to the social services—in the form of keeping going industries that would otherwise close—or it is not investment but waste.
One key to our recovery is increased productivity. Not enough attention has been paid to that. The Government would do well to get together with the financial organisations in the City. They would also do well to remove the monopoly powers of the nationalised industries.
At present, credit and interest rates are the Government's main weapons in the control of the money supply. They have also increased indirect taxes, such as VAT and those on fuel. However, they should reconsider those weapons. They hit not those who cause inflation but the productive part of the country. They are hitting the wrong people, and so are increases in VAT and fuel costs. Putting extra taxation on fuel means that my constituency suffers not a 20 per cent. increase but a 30 per cent. increase in the cost of fuel because there is a special surcharge. If that is not enough, I do not know what is.
On the Government's credit policy, I do not believe that the British banking system is supplying industry with the services that it expects. I urge the Government to look at the way in which the banks behave in other countries, for example, in Japan. I also urge them to look at varying interest rates. The Government talk about the need to encourage small businesses, but there is nothing more crippling to such businesses than a very high rate of interest.
It is certainly one of the main duties of a Government to keep the currency stable. The trouble is that the Government are becoming just another interest in the competition. They are no longer looking after the general interests of the country. Perhaps the time has come to denationalise the Bank of England and return control of money and credit to other than Government hands. I do not know whether any Government can be trusted, particularly when an election is coming along, to handle this in the general interest.
Let us be clear that there is nothing mysterious about high prices; nor is anyone else responsible but the pressure groups who ask constantly for more money while production is falling, and Governments which give way to them. That is why prices are high.
It must be stressed that Governments, to do them justice, very often give way at public request and there is a continual clamour in this country from the public for more services, more unproductive expenditure, and higher wages and salaries to be paid for by the Government. Therefore, while the Government must have the ultimate responsibility, they are certainly not the only organisation in the country that is clamouring for more. Some blame must be attached to the public at large, and particularly the bodies into which the public is organised.
In the hope of catching your eye this afternoon, Mr. Deputy Speaker, I did a little preparation at lunch time today when I searched for some evidence of a counter-inflationary policy, a rethink or any new ideas from the Opposition on ways in which prices, or the pressures which cause increased prices, could be reduced. I am afraid that there was a dearth of material. I was given some unexpected assistance from a gentleman in the Tea Room, who said that he was from the Parliamentary Labour Party. He presented me with a document entitled "The Threat to Industry and the Welfare State ", with the subtitle " A Crisis of Monetarism and the TUC Alternative ".
On the basis that what the TUC says today the Labour Party will say tomorrow, and on the basis that this seems to be the only policy document available that gives some idea of the Labour Party's intentions, I spent a few moments looking at this alternative counter-inflationary policy. It is an interesting and somewhat natty presentation, with a juxtaposition of colums headed " Myth " and " Fact ". The first myth runs as follows:
The way to cure inflation is to control the money supply and put up unemployment.
The corresponding fact is:
Prices and unemployment are going up together. Direct controls are needed on prices as part of a consensus on economic policy.
The first myth is not so much a myth as a simplification. My right hon. Friend the Secretary of State for Industry has written an admirable pamphlet entitled " Monetarism is not Enough ". In that, he and many of his colleagues in the Cabinet say that if we do not get the money supply right all the other things that are factors in the cause of inflation will have no effect at all. They will lack any firm foundation.
Like the right hon. Member for Orkney and Shetland (Mr.Grimond), I agree that there are other causes of inflation. He referred to a very relevant cause—the link between productivity and income, and I shall say more about that later.
I return to the fact that prices and unemployment are going up together. It is true to say that the term " stagflation " was probably coined in the aftermath of the return of the right hon. Member for Leeds, East (Mr. Healey) from London airport on that fateful day three or four years ago. With a stroke of genius he managed to coincide increased unemployment with increasing prices, and a balance of payments problem to boot. He was the first Chancellor since the war to get those three factors to deteriorate simultaneously. Therefore, it ill-behoves Labour Members to accuse us of all the ills with which we have been identified, because we are the inheritors of a difficult set of problems.
I tried to intervene in the right hon. Lady's speech, but she refused to give way to anyone. Is the hon. Member suggesting that the Conservative Government find themselves in a position, in 1980, that is worse in terms of the money supply and the general economic position than the one that we inherited in 1974 after the printing of money under the Barber regime? Is he really serious about that, or has he failed to study the economic history of this country?
I am delighted to take that point. If there had been no changes in our fiscal policies as a result of the Chancellor's first Budget, we should have had to find an additional £5·5 billion by the end of next year—that would have been the size of the increase in the public sector borrowing requirement. I challenge the hon. Member to say how he would fund that increase in the borrowing requirement, particularly as in his earlier interjection from a sedentary position he challenged my right hon. Friend over interest rates. Surely, if we are to reduce interest rates, as we are trying to do, we must first attack the public sector borrowing requirement. I have every confidence that once interest rates start to fall, they will fall rapidly. I know that it is dangerous to make predictions of this sort, but I stress that I have every confidence that when interest rates start to fall, they will do so rapidly.
The second myth in the TUC pamphlet says:
Competition and market forces are the answers to Britain's industrial problems.
Juxtaposed in the " fact " column is this:
All successful industrial countries rely on Government intervention and protection of their basic industries. Government must plan to regenerate British industries and protect our industries from unfair competition from imports.
Again the statement of the myth is more of a simplification. We have abolished the Price Commission, and rightly so. We are replacing it with the Competition Bill. I shall give an example of what this Bill will do. It will tell a washing machine manufacturer, for example, that he may no longer deny a wholesaler or a particular retailer access to his products because he is selling them at above the rate which the manufacturer would not find profitable. In other words, certain manufacturers will not be allowed to restrict the outlets through which they supply their products to the general public. That attacks the mechanism of the mark-ups that one gets in middle ground between the manufacturer and the customer. That is the real way to tackle price increases.
Let us contrast that with the Price Commission. In an earlier debate the right hon. Member for Down, South (Mr. Powell) said that to tackle increases in prices through the Price Commission was tantamount to saying that rainfall was caused by wet pavements. There is an awful lot of sense in that reasoning. When the Price Commission was in evidence we were trying to deal with a train of events, the cause of which had long since gone out of control.
I return to that statement in the pamphlet which is an alleged fact, namely:
All successful industrial countries rely on Government intervention and protection of their basic industries.
There is no qualification of that sentence. The word " rely " is used. May I cite
the example of Cuba? Let us look at a piece of Government intervention in that country. I am told that the Cuban economy is deteriorating rapidly. Someone, somewhere—a Cuban official—decided that he knew better than the tobacco growers in his country and those who worked in the industry. He wished to introduce a new strain of tobacco. However, that strain was more delicate and more susceptible to disease, with the result that there was a disastrous crop. The result—coupled with complications in the sugar industry—is that an interventionist economy has produced so much disorder and discomfort that 10,000 Cubans who wish to flee the country are waiting in the compound of the Peruvian Embassy. That is an example of intervention par excellence. An economy can be ruined by a tiny decision from a small bureaucrat.
I agreed with much of what was said by the right hon. Member for Orkney and Shetland, particularly his comments on productivity, but my evidence, again, is from the TUC pamphlet. It says that investment per head in manufacturing industry from 1970 to 1974 was: the United Kingdom, £240; West Germany, £450; and the United States, £740.
On the facing page, the question about our poor investment rate is answered by dealing with productivity of new plant, with the United Kingdom as a base of 100. The figures are: Sweden 145; Japan, 157; and West Germany, 190 If, at constant prices, we took the amount of investment in plant in the United Kingdom and compared that with equal investment in West Germany or the United States, we would find that those latter countries enjoy a far better return on their investment.
I hope that there is agreement that we have restrictive practices in this country. Somehow, we insist that when we instal a new machine in a car plant track we retain the same number of men to oil or paint it. We hoard the labour. Whether or not it is admitted officially, there is a great fear in the trade union movement that productivity equals redundancy, or conversely—and more horrifically—that lack of productivity, or low productivity, equals more employment. Some shop stewards say that they are not interested in productivity because it means job losses, smaller union branches and fewer union subscriptions. That happens. It is part of their psyche. We should face that problem head on and recognise that it as a factor that contributes to inflation.
I do not agree with the right hon. Member for Orkney and Shetland about the desirability of certain aspects of previous incomes policies. I believe that an incomes policy of sorts is currently being operated by cash limits in the public sector—if public sector wages increase too rapidly they will have to be paid for by increasing redundancies and by money supply in the private sector. It will be a long and difficult task—but one in which I believe the Government are succeeding—to persuade our people that those two tactics amount to one simple thing, namely, that we do not get something for nothing. To use a good old Yorkshire expression " You don't get owt for nowt ". That is the Government's underlying philosophy on incomes, though I am loth to describe it as an incomes policy, with all that such a description evokes.
I said that I had found little in my search for inspiration. However, not only did I find the TUC pamphlet, but behind the glass cases in the Library Corridor I noticed two books. One, a large tome, was called " Socialist Economics ", and next to it was a book by Eugene Northrop called " Riddles in Mathematics ". I wonder whether what we heard from the right hon. Member for Lanarkshire, North (Mr. Smith) was not so much a well thought out and argued motion, but a riddle. Perhaps we should try to find somewhere in his statement a hint of what will appear in the next Labour Party manifesto. I suggest that what will appear will be a Price Commission and platitudes.
I do not agree with the hon. Member for Coventry, South-West (Mr. Butcher) that we have heard a riddle from my right hon. Friend the Member for Lanarkshire, North (Mr. Smith). However, I noted that the right hon. Lady the Member for Gloucester (Mrs. Oppenheim) gave us 25 minutes of history but said nothing about what her Government would do. My right hon. and hon. Friends might find me in favour of cutting public expenditure if the closure of the right hon. Lady's Department could be guaranteed. Her Department does little good for the consumer or the general public.
The right hon. Lady mentioned, en passant, that the Government's new legislation had come into being this month. She said little about the twin mechanisms on which we have been lectured over the last two months. One of the twins gives the Director of Fair Trading the power to investigate a company which he believes is carrying on anti-competitive activities which prevent market competition.
The other twin which came into being a couple of weeks ago provides powers for the Secretary of State for Trade to order the Office of Fair Trading to investigate those price rises which he thinks are of major concern to the public. We heard very little of that in the right hon. Lady's speech.
A variety of price rises is causing public anxiety. I mention two sectors in which I believe the Secretary of State has power to act. I remind the House that when the Labour Party was in government we asked the Price Commission—in the public interest—to look into the activities of the milling and baking industry. We did that because two of the large milling and baking concerns controlled about 70 per cent. of the market. We felt that their activities were not conducive to competition, were not in the interests of the consumer and were not in the interests of our counter-inflation policy.
When the Conservatives came to office the Secretary of State for Trade stopped that inquiry. Why did he do that? We were (old—no doubt I shall be corrected if I am wrong—that it was not in the public interest to continue with it. That is nonsense. Control over the market and over such basic commodities as bread and flour--so vital to the family—is of public concern. Is it not time that this newborn baby which breathed life for the first time a couple of weeks ago was used by the Minister to take action in this context?
I turn now to the increase in petrol prices. I accept right away that international oil prices have been on the increase and that they have an enormous effect. When the last Labour Government were in office those prices increased massively four times in that perod. When we left office 12 months ago I was paying about 80p for a gallon of petrol. Deliberate Government policies have increased the price of petrol twice during the last 12 months. The cost of living has been put up to that extent by deliberate Government financial policy.
However, that is not the end of the matter. As one petrol company puts up its prices, others follow suit. They leap-frog over each other in their efforts to get the maximum amount out of the mugs—the motorists and the travellers. If one company can increase prices, so can another, and there is nothing to stop them. Petrol now costs a copper or two short of £1·40 per gallon and, coupled with that fact, we should note the surplus profits made by the petrol companies.
The Financial Times carried an article on 14 March headed " BP after-tax profits soar ". The article recorded that after tax the profits of BP last year soared to £1½ billion. That was nearly four times the profits of the group for the previous year.
I certainly hope so. If it had not, I should like to have known why. I should like to continue. Royal Dutch Shell profits were £3 billion. It trebled its income. Therefore, I hope that it wrote out a cheque to the Government. Mobil, Gulf, and Standard Oil all had increases of well over 50 per cent. I hope that they wrote out cheques to the Government, just as I hope Texaco did, because it increased its profits by more than 100 per cent.
I am not saying that such profits should necessarily be denied. However, if, at a time when oil prices are rising as rapidly as they are, companies cannot make profits such as that, they should not be in business. That is the only point that I am making.
I am sure that the hon. Gentleman has some social conscience. Surely it cannot be right that at a time when profitability is allowed to increase at that rate, and while petrol companies are allowed to increase petrol prices, there is no mechanism to stop them. Nothing exists to inhibit them. It is a free-for-all. The attitude seems to be " Let us take the mugs for as much as we can get from them." I should like to see a darn sight more of the money returned to the Government.
Surely those who pay at the filling stations have the right to ask for some justice. Surely such profits should not be allowed to continue without those who pay getting some benefit. Therefore, I believe that the Government should take some action. If the right hon. Lady does not think that the combination of the rising cost of petrol, whether to the motorist or the traveller, coupled with profitability, and the anti-competition element is of major concern to the public, I suggest that her antenna is not tuned in to public opinion.
What does the hon. Lady make of the fact that not far from here on a road in East London—the same probably applies to many other parts of London—one can see garages less than 100 yards apart which sell petrol at £1·30 per gallon and £1·40 per gallon, both of which are surviving and both of which are satisfying their customers? Does that suggest to the hon. Lady that there is a great deal of concern in the public's mind about petrol prices?
There is a great deal of public concern, not only among car owners but also among a lot of small garage owners. One such owner from whom I buy petrol is extremely concerned about the price which he as a retailer has to pay. There is considerable concern about this matter. The competition policy about which we have heard so much from the Government has certainly not been exercised. I have checked the price of petrol in London within the last few days, and I have found it to be nothing less than £1·38 a per gallon to £1·40 per gallon in the area around here that I use.—[HON MEMBERS: "It is an expensive area."]—I am talking about the Edgware Road, and I woud not call that an expensive area. Fortnum and Mason do not happen to sell petrol. The right hon. Lady informed me of that, and it was extremely helpful of her.
We have all been lectured about the new legislation during the past few weeks, Why does not the right hon. Lady hold a christening party, give it life and use the powers which the Secretary of State and her Department possess, in order to take some action on behalf of the people of this country?
When the Secretary of State believes that there is major public concern about a price increase, he has the authority to refer it to the office of the Director General of Fair Trading. It is a very small section in the Act which has had very little publicity. But it was referred to extensively in The Times the other day, and I am sure that most hen. Members saw that article.
I shall not continue with the never-ending list of price increases, except to say that they have all taken place within the space of a year. For every £1 which we spent last year, we must now pay £1·20 for the same article or type of service because of the 20 per cent. price increase which has occurred as a result of deliberate Government action.
In their first few months in office, the Government were fond of claiming that Labour had left them a legacy of price increases. In particular, the Minister for Consumer Affairs lectured her Tory lady friends at various garden parties about the legacy of price increase in the Socialist pipeline. I read her speeches avidly. They are better than " The Dandy ". There was never any foundation for that charge about the Socialist pipeline. It was designed by the public relations men in the right hon. Lady's party, and she could never make it stick.
As my right hon. Friend the Member for Lanarkshire, North said, the glimpse into the future is fascinating. Prices will continue to increase because no action has been taken. The Chief Secretary to the Treasury gave the game away only the other day by saying that we face three years of unparalleled austerity and that the Government will not be able to reduce the rising cost of living to the figure of 10 per cent., which it was under Labour, for another three years. What a condemnation that is. In three years' time, the Government will have just about managed to have brought inflation down to what it was when they assumed responsibility for the management of the country.
It is not a pipeline which the Tories have constructed for their price increases. It is an absolute jet-stream, which will reduce our standards of living and our quality of life not only this year but for many years to come. The people are entitled to know what action the Government will take. The right hon. Lady has given us the history. We want to know what action the Government now propose to take to reverse this trend.
The right hon. Member for Lanarkshire, North (Mr. Smith) embarked on what can only be described as a phoney attack on rising prices. Not only does he know that his argument was totally phoney, but it is also clear that the seven or eight Labour Members who were present while he spoke also appreciate it. There were so many flaws in it that even his persuasive style could not disguise them. With good sense, style and reason, the right hon. Gentleman argued that not all price increases which had occurred since the Government had come into office on 3 May could be attributed to their actions. Unremarkably, he pointed to the increases in the world price of oil. Yet before making that apparently noble concession, he attacked the increase in gas prices. In his meteoric rise from the shores of Loch Fyne to his entry in this House, the right hon. Gentleman had responsibility for energy matters for a considerable time. He knows perfectly well that there is a necessary and direct relationship between the price of oil and the price of gas. He cannot escape that fact.
In the last phoney, damp squib attack on the Government in relation to gas prices, even his right hon. Friend the Member for Plymouth, Devonport (Dr. Owen), who now has responsibility for energy matters, was forced to concede that had he been in power he would have had to agree that gas prices should rise at least in line with the current level of inflation.
The right hon. Gentleman said that the whole level of the increase in gas prices is a responsibility that the Government must bear. If he wants to advance the argument that the Government must bear responsibility for 10 per cent. of the total increase, that has some logic and reason. It is a wholly dishonest argument to attempt, as the right hon. Gentleman and the Opposition generally have done, to place the blame for the whole increase at the Government's feet.
A l0p a gallon increase on petrol was imposed in the Government's first Budget, and a further 10p increase was imposed in the second Budget. Twenty pence of the increase from 80p to 130p a gallon was imposed by the Government. My hon. Friend the Member for West Bromwich, West (Miss Boothroyd) has made the point that the oil companies are making tremendous windfall profits. Why have the Government not been tackling those windfall profits of 30p a gallon since the election rather than forcing the Gas Council to put up its prices because of the increased petrol prices?
I suggest that, after the debate, the hon. Member for Aberdare (Mr. Evans) takes aside the right hon. Member for Lanarkshire, North and asks him to explain how much the Ekofisk field will cost in capital expenditure over the next three years. The cost of developing the North Sea, whichever field one examines, is so colossal that profits will be taken up in the development of those fields.
The right hon. Member for Lanarkshire, North also attacked the change introduced by the Government in raising the level of VAT in their first Budget. It was wholly right, in my view, that the Government should begin to bring about a substantial switch from direct to indirect taxation. Whatever fun the right hon. Gentleman may have at press conferences during election campaigns—allegations and denials and the like—one matter from which he cannot escape is that the underlying theme of the Conservative Party, for many years in opposition and since coming to power, is that we should make the switch in the style of taxation.
The difficulty for the Government is that there is never a wholly right time to make the switch. So long as such indicators as the retail price index are used, this will necessarily mean that there is apparently a rise in inflation. The Government are pursuing the correct line and the correct approach. What causes great concern in the country is the growing volume of evidence of the amount of money in the black economy that is not being subjected to taxation. The figures range between £5,000 million and £11,000 million. If the switch is made from direct to indirect taxation, there is a far better possibility that sums not being paid in tax will be trapped.
I wish to refer to the switch in VAT. If one looks to the RPI, there has been an effect. One can call it inflationary if one wishes. At the end of the year, however, it will disappear from the index. There will be an adjustment. Will the Opposition, at that point, agree that it has worked through the system? The answer is " No ". They will rely on the argument that a technical adjustment is taking place. What is sauce for the goose is sauce for the gander. If the Government have had to face up to this matter in the last year, I trust that the Opposition will have the courage to admit, at the end of the year, that it has worked its way through the system.
The main attack has been on gas prices and VAT. The change made by the Government in their first Budget was correct and courageous. Nothing stated by the Opposition since then, or during the debate, should lead anyone to have any reason to doubt that.
Debates on the cost of living always tend to spill over on to economic policy. It is right that Government and Opposition should exchange views on this matter. One of the differences to which attention needs to be drawn is the impact of the cost of living on particular groups. The biggest difference between the two parties is that the impact of rising prices falls greater on the low income groups under the present Government than under the previous Government.
There will be rises in the cost of living under a variety of Governments, for a variety of reasons, many outside their control. More within our control is the ability to decide those who will be affected by the increases. Because of the time constraints on this debate, I wish to focus my comments primarily on one area that causes many people increasing concern. I refer to the rise in domestic fuel costs, primarily gas and electricity. I am particularly concerned about the effect on those on low incomes. The average increase in the price of electricity since March 1977 is 42 per cent. For gas, it is about 19 per cent. There are individual variations and variations also between different parts of the country. It is nevertheless a terrifying rise overall.
The rise in electricity prices since March 1979 has been 18 per cent. A figure that I saw recently increased my alarm. I fear that it is only the tip of the iceberg. The London Electricity Board reported—I regret that I cannot give figures for the rest of the country—that in the last 12 months, 3,365 London homes had their electricity disconnected, more than double the figure for the year ended March 1978. In the last 12 months, more than twice as many homes as in the previous year have had the electricity cut off. These homes include families with young children as well as the elderly, despite guidelines laid down by the previous Government.
Will my hon. Friend agree that this is symptomatic of the lack of understanding on the Government benches? The Cabinet is full of wealthy men and women. It includes five large landowners and two substantial farmers. There have been tremendous increases in farm prices over the last year which have hit the consumer who has to buy goods in the shops to the benefit of the wealthy farmer. Is there not a total lack of understanding in the Government about both fuel prices and general prices?
I simply emphasise that everyone must be increasingly concerned about fuel costs, for reasons which I shall explain. It has been possible to argue in the past, as many supporters of free enterprise did, that people must make the best of their own situation. One could say in the past that people should go out and collect wood for a log fire in the home. That is not possible in a high-rise block of flats. Those blocks of flats and modern housing have been brought about by both parties. The reasons are many and com-. plex. They are not simply political. They are due to passing beliefs among architects. There was a tendency for some years, as the increase in fuel prices continued, to move towards paraffin. Hon. Members know what has happened to paraffin prices recently. There are, in any case, two further dangers about paraffin. It causes acute condensation, particularly in modern buildings and, secondly, it is a serious fire risk. Paraffin is not the answer despite the fact that many people on low incomes depend on it.
Domestic fuel is of criticial importance in a modern urban economy to ordinary people on low incomes. The best way to exemplify this situation is for me to give two or three examples drawn from my constituency, although I do not believe that they could not also be found in the constituency of every hon. Member attending the debate. I am certain that they have got significantly worse in recent years.
The first case concerns a blind mother of a child of 7. She mounted up a gas bill of £80. There were a number of warnings. It is generally agreed that there was a breakdown in liaison between he social worker and the gas board. Whose fault that was I am not concerned with at this point. The point is that gas board employees eventually broke into her flat when she was not there and disconnected the supply. I ask hon. Members to consider what it means to such a person coming back to her flat in a high-rise block and finding the door broken open. I ask hon. Members to consider even more seriously what it means for someone who is blind and alone.
The key to this situation is that that lady was employed as a clerical worker on a Braille typing machine and was earning £42 a week net in August last year. It is difficult to argue that that woman does not deserve extra support of some kind over and above what she was given, in view of the rise in fuel prices in recent years.
The second case concerns a mother of four children. She has had her electricity cut off for several months now. She was working 7½hours a day and earning £22 per week net. One of the reasons for that ridiculously low sum was that she was being grossly and wrongly over taxed—a matter to which I shall return. In desperation, because her fuel bill was now into four figures—the electricity supply was cut off when the debt reached about £1,500—she took another job which took another seven hours of her day and increased her income to £52 a week net. She was in the catering trade—a well known low paying trade.
After spending some time with her, I discovered that she was not only being over taxed, but was not getting the appropriate education grants and child benefits. However, over and above that, she would have been in difficulty in paying her fuel bill.
The third case concerns a mother of three children under 5. Her electricity supply has been cut off for eight months. She has multiple social, economic and emotional problems and is in need of considerable support. At one time, when she was relying on supplementary benefit, the local office had to decide whether it could pay the fuel bill on a weekly basis. Had it done so, it would have left her—this was in late 1977—with only £12·50 per week to spend on herself and her children.
The position is serious. It has been serious for several years. On the basis of the LEB's figures and of the retail price index percentage increases, it is now becoming infinitely more serious. I suspect that, with the rise in fuel prices that we have seen recently, combined with the rise in paraffin costs, it will get even more serious in the next 12 months. That is the importance of a debate on the cost of living. That is the meat on the bones of the economic argument.
In the past, local authorities might have stepped in to help families such as these who were in need, even though some of them were in employment. The social services departments could step in and, under section 1 of the Children Act, provide help from that source. They are reulctant to do so now because they are having to cut back. The Department of Health and Social Security would have, stepped in in the past, but it is increasingly reluctant to do so now. Also in the past charities were prepared to step in and help. In the past two or three years they have increasingly refused to do so, feeling that it is not for them to pay electricity and gas bills.
I acknowledge that the electricity and gas boards have a problem. Their job is to collect money for services provided. But, to my mind, they take it too far. The hon. Member for Loughborough (Mr. Dorrell) shakes his head. Is he satisfied that, in the second half of the twentieth century, calling ourselves a civilised society, it is right for a public body to break into the fiat of a blind mother of a seven-year-old child and cut off the gas supply?
No, far from it. That was not the direction of my argument. First, it is a problem of low income, and we must accept that. But this is where the problem becomes complex. It is a matter not only of fuel prices going up, but of other prices going up. As my right hon. Friend the Member for Lanarkshire, North (Mr. Smith) said, if VAT is put up to 15 per cent., there will be less to spend on fuel, even if fuel prices have not gone up. Therefore, there will be a major problem for low income groups.
When it comes to considering who should receive help, the problem becomes even more complex. The hon. Gentleman is right that we should not just step in and help the person who does not pay his bill. But should mothers with young children, the elderly, the infirm or the handicapped have their gas or electricity supples cut off? Would the hon. Gentleman be prepared to cut off the gas supply to a blind mother of a seven-year-old child and to break into her flat to do so?
The hon. Gentleman asks how I would set about it. I refer him to the help that my right hon. and learned Friend the Chancellor of the Exchequer gave in his Budget towards the fuel bills of low income families. That is the way to decide who should have help with fuel bills. We should look at people's incomes and give help to those who need it.
That is right, but it is not adequate, and I suspect that the hon. Gentleman would accept that it is not adequate. The hon. Gentleman still misses the point. It may be that the parents are to blame for the mounting fuel bills. But what is the position of the children? We cannot ignore them. Are we to go on perpetuating the problem of family poverty? Even the Secretary of State for Industry has commented on the cycle of family poverty. That is what this debate is about.
There is an urgent need for additional financial help to be given towards fuel bills or for lowering the impact of the cost of living on low income groups. Alternatively, it should be possible for the gas and elecricity boards to review their procedures, because they are not satisfactory if the situations that I have described happen, as they do with increasing frequency in my constituency and, I suspect, in other constituencies.
I have already suggested to the chairman of the London Elecricity Board that the Board should appoint more qualified staff to go into people's debts before they reach such absurd proportions as £1,500. If I was able to find out in a 10-minute discussion in my surgery that a woman was not getting proper tax relief, child benefit or education grants, it should not be beyond the wit of two major domestic fuel suppliers to have a service of that type.
I would mention only one further point—the increasing concern now being expressed by my local authority, which is not Labour-controlled, about the numbers of landlords who are not paying their fuel bills with the result that the gas or elecricity supply is cut off, even though the tenants have been putting money into the meters and the landlords have been taking it out. The problem is that, even though the local authority has power to step in at a certain stage, the two boards switch off the supplies first and that matter cannot be sorted out quickly. That is probably not a matter of low income. I suspect that only one or two landlords do that for reasons of low income. That is a wider part of the problem.
My main concern, with which I hope the Minister will deal in response to the debate, is the increasing problem of fuel poverty. I draw attention to the fact that the number of homes cut off in London has doubled in the past 12 months. The situation must be similar in other areas of the country and it must be a cause for concern. We have created an environment in which we expect people to live and where they have no alternative fuel supplies. Several of the cases to which I have referred are totally reliant on one fuel, particularly electricity, which is the most expensive. This is a crisis problem for individuals. I hope that it gives some meat to a debate of this character and will give the Government an opportunity to put it right.
This debate on prices, noticeably ill-attended by Socialist Members whose negative motion is being debated, involves the most fundamental problem inherited by the Government, the most fundamental problem facing the Government and the most fundamental problem that the Government will tackle successfully. That problem is inflation, which manifests itself to our citizens as rising prices.
My confidence in the success of the Government's action is based on one key fact: that they have an understanding of the real cause of inflation that was sadly lacking when the Labour Government were in power, except briefly when the International Monetary Fund had to rescue our economy from threatening disaster because of Socialist maladministration.
Inflation is the underlying sickness which has contributed more to the malaise of this country than has any other factor. It can be tackled successfully only by understanding that, as long as we print money far in excess of the growth of our economy, prices will soar. Too much money chasing too few goods can only result in the continuation of the crisis that we have seen over the years. It follows, therefore, that borrowing additional money to fund expenditure can only make the situation worse.
The Conservative Government are tackling this fundamental problem firmly by reducing public sector spending, recognising that we shall have to experience some difficulty in the short term as a necessary consequence, but in the longer term the way will be paved towards lower inflation and lower taxation.
The Conservative Government were elected last year on a manifesto that included a clear commitment to reduce public sector spending. It is becoming increasingly obvious to everyone that if we are to free ourselves from the continuing economic problems associated with spending more than the country earns, such a policy has to be carried out, and without delay.
I am sure that the few hon. Members who are on the Labour Benches are fully aware of the excellent advertising campaign which has recently graced hoardings throughout the country. The campaign to which I refer evokes the sound notion of supporting the Conservatives to keep Britain out of the red. That is the essence of the nation's difficulties created by Socialist maladministration and based on Socialist lack of understanding.
As my right hon. Friend the Minister said earlier, monetarism is economic common sense. The Conservative Party was elected to put common sense back into British government, and that will be the true mark of its success, not least with regard to inflation and the cost of living.
The Opposition are fully justified in selecting this subject for debate. Hon. Members who have referred to the low attendance should be aware that Committees are sitting and party meetings are taking place. I notice that only five hon. Members are to be seen on the Government Benches.
The Government's policy on inflation is a complete failure. One argument put forward by a Conservative Member was that when Labour came to power oil prices increased by 400 per cent. and that was a factor in inflation. But then we had to import oil. Now we are producing our own oil. Therefore, as we are almost self-sufficient in oil the rate of inflation should be lower. The Conservative Party went to the electorate saying " Vote Conservative, and we will bring down the cost of living." What they have done is to bring down the living standards of the people. There has been a deliberate attempt by the Government to increase inflation.
When Labour left office inflation had been brought down, with the help of the Price Commission, to 10·8 per cent. The rate of inflation in the first 12 months of this Government has doubled. That is the charge made by the Opposition. The Tories have doubled the rate of inflation, while the Saatchi and Saatchi posters told the British people that they would reduce it.
Let us examine how the rate of inflation has been doubled. Are there external forces at work? The Minister for Consumer Affairs spoke about other Governments. Presumably, she was referring to Germany where the German social democratic Government have kept down the rate of inflation to a figure similar to that which was in force when the Labour Government were in power. She might have been referring to the Austrian social democratic Government, who have kept down the rate of inflation. We cannot blame international circumstances because, as the right hon. Lady said, other Governments in Europe have kept down inflation while under the Tory Government in this country the rate of inflation has doubled.
Let us analyse this 9 per cent. increase in the rate of inflation. My right hon. Friend the Member for Lanarkshire, North (Mr. Smith) rightly said that the first act of the Government was to increase the rate of VAT from 8 per cent. to 15 per cent., although the Conservatives promised not to raise VAT. Before the Tory Government came to power, the VAT on a television set costing £300 was £24; it is now £45, an increase of £21. Before the Tory Government came to power, the VAT on a motor car costing £4,000 was £320; now it is £600, an increase of £280. That is the party that said it would bring down taxes.
I will come to that. It is the wealthy who have benefited from the tax cuts. The average wage earner has suffered. He has had to pay VAT of 15 per cent. instead of 8 per cent. The increase in VAT represents 3¾ per cent. of the increase in the rate of inflation. The increase in national insurance contributions added another ½ per cent. The cutting of support to local authorities and nationalised industries meant a 1¾ per cent. increase in the inflation rate.
The green pound has been devalued. We have had arguments in the House about the common agricultural policy. We contribute £1,300 million to Europe to keep European food prices down and that leads to our food prices being increased.
If the right hon. Lady the Prime Minister meets Franz Joseph Strauss, who is visiting the Tory Party today, I hope she will not tell that Bavarian political animal that there will be concessions at the forthcoming Summit talks. The right hon. Lady has got herself into difficulties. She thought that the Summit conference would take place in Dublin. She invited Franz Joseph Strauss to meet the Tory Party in the House today thinking that she would already have reached a settlement with Schmidt and the other leaders. But no, it is typical of the Tories that they have arranged for Mr. Strauss to come the weekend before the right hon. Lady goes to wherever she is going to talk about the reduction.
The Tory Government have increased the minimum lending rate from 12 per cent. to 17 per cent., the highest rate that we have had in this country, and yet the Tories used to complain about the level of the rate when the previous Labour Government were in office. That increase has added 1¾ per cent. to the retail price index.
I shall give way to the hon. Gentleman in a moment. The borrowing rate has gone up from 10 per cent. to 19 per cent. or more, and 8½ per cent. of that increase of 9 per cent. has been as a result of the fiscal, financial and economic policies which have been put forward deliberately by the Government.
I am very grateful to the hon. Gentleman for giving way. Will he agree with me that, having listed the problems as he understandably sees them, he ought also to consider the fact that wages are rising faster than the rate of inflation? He does not seem to have taken that factor into account.
I do not know whether the hon. Gentleman is saying that in defence of the Government. Is he saying that the Government support the fact that wages are rising by 20 per cent? These are the people who complained, when the Labour Government were in office, that we had a social contract with the trade union movement. We were able year by year to restrain wage levels, which meant that inflation was brought down year by year. As a result, the rate of inflation was far lower when we left office in 1979 than it was when we came into office, following the period in which the Tory Government had been printing money. We remember what happened when Lord Barber as he now is was at the Treasury. There was chaos in the financial markets. The Tories had negotiated with the trade union movement that wages should increase with inflation.
They would tell me that they would prefer a high wage/low tax economy. But under the present Government the steel workers—some of them live in my constituency and some have relatives there—have taken a cut in their living standards. The Government have not tried to bring out a fair incomes policy. They say that they believe in market forces. With the Secretary of State for Industry in the background, they have picked on British Leyland and on the steel industry, while at the same time allowing increases in wages to take place elsewhere. They have picked on certain workers. The strike in the steel industry was deliberately provoked by the Government. The costs of that action will work their way through not only in the steel industry but also in the coal industry, the gas industry and on British Rail. That will be the result of the mad monetarist policies being pursued by the Government.
The Labour Government had a Ministry to deal with prices and consumer protection. The question of prices is very important if we are to seek the co-operation of the people of this country in restraining wage increases. Unfortunately, Tory Members believe in a free-for-all in wages. We are now apparently operating under the market economy, in which the strongest take the largest share, and in which the philosophy is that of every man for himself and the Devil take the hindmost.
That Tory philosophy is leading to the position where we have 1½ million unemployed, the highest figure since the end of the war. The position will get worse unless we have a reversal of the mad monetarist policies which are being pursued by a cabal in the Cabinet.
It was a mistake to take the prices Minister out of the Cabinet. I am sure that the right hon. Member for Gloucester (Mrs. Oppenheim), in her heart, believes that there should have been a Minister in the Cabinet concerned with consumer protection. Increasingly, as we move towards a diffcrent type of society, in which presumably, production will increase, and where there is greater wealth to be shared, we shall become more consumer conscious. That being so, there should be in the Cabinet a Minister who is concerned with prices and with consumer protection. But the right hon. Lady was demoted; she was given the status of Minister of State. The present Prime Minister said " We are not having a Minister in the Cabinet concerned with prices." I believe that Tory Members will regret that decision.
The Opposition have been fully justified in tabling the motion. It is true, as has already been implied, that the effects of the VAT increase will slip out of the retail price index in a month or two, but those who will be buying their cars will still be paying the extra tax imposed by the Government. Those who are buying their television sets will still be paying that tax.
The Government, by their actions, have provided us with a very good poster for the next general election. We shall not need the services of Saatchi and Saatchi to expose the way in which the Tories have undermined the living standards of the people and boosted inflation.
I shall be delighted, Mr. Speaker, to resume my seat by 6.30 pm.
I have enjoyed listening to the hon Member for Aberdare (Mr. Evans). I heard his speech once or twice before, when we were both on the Standing Committee dealing with the Competition Bill. He has honed it down since then. His phrases are more rounded and his anxiety is more extreme, but it is still a very good speech to listen to, although I find it very difficult to agree with much of it. I enjoyed every minute of it.
I came into the debate at a fairly late stage. I apologise to the right hon Member for Lanarkshire, North (Mr. Smith) for the fact that I did not hear him introduce the subject that we are discussing.
I have been struck forcibly by the fact that all the speeches that I have heard from Labour Members have concentrated on attacking the first 12 months of the Government's record and that not one positive proposal has come from them. In the three minutes remaining to me, I should like to pose three questions to the hon. Gentleman who is to wind up for the Opposition. I should like him to tell the House in what respect he believes his party, if it had been in office in the last 12 months, would have done better.
The Price Commission has been much discussed by Labour Members. When I spoke in the Second Reading debate on the Competition Bill, I said that I would never say in this House that I would never vote for price control. I am still a relatively young man, and in the career that I hope may lie ahead of me I would not wish to bind my hands in that rigid way. History would tend to suggest that that would be unwise.
When the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) introduced the Bill relating to the Price Commission—a body that we rightly abolished—he explained in very simple words that the Price Commission was not a medium for controlling prices. It was a medium, supposedly, for promoting competition or for promoting an efficient economy, but it was not seen as having a direct effect on prices. When the right hon. Gentleman was asked what he thought the Price Commisssion had done to prices, he said that he thought it had had the effect of reducing them by one half of 1 per cent.
When discussing the inflationary pressures that we inherited this time last year, it is not sufficient for Labour Members to say that the Government should have left the Price Commission in situ. By the definition of the man who introduced it, that was not a sufficient policy.
What policies does the Labour Party have to offer for the control of inflation or for the economy in general? Just as there are two Labour Parties, there are alternative economic policies being proposed. I assume that the reason why there are so few Labour Members present for the debate is that they are fighting upstairs about which of the alternatives should be put into practice.
The first alternative is based on comprehensive protection. One branch of the Labour Party would like to introduce comprehensive import controls, because it believes that they would protect our domestic manufacturing industry and create jobs, output and economic stability. But it is impossible to introduce such protection without putting up prices. Labour Members cannot vote for the motion if they believe in that economic strategy. It would lead to rising prices.
The other branch of the Labour Party complains about the strength of the pound. I have some sympathy with that point of view, but Labour Members cannot say that the pound is too high, and, at the same time, complain about the level of inflation. If they argue that the value of the pound should be reduced, in order to improve the prospects of British manufacturing industry, they have to accept that that will have inflationary consequences.
It is difficult for Labour Members to espouse either of those alternatives—and I have not heard of a third course—and vote for the motion.
It is difficult to have a debate on the cost of living without referring to the Conservative Party's public relations advisers. Let me put a mathematical riddle to the House: if the words Saatchi and Saatchi represented the rate of inflation a year ago, what words represent the rate of inflation today? The answer is, of course, Saatchi, Saatchi, Saatchi and Saatchi.
As so often, we got from the Minister a history lesson. She is not yet used to the fact that she is a member of the Government. Perhaps one day she will tell us something about the future. The Government inherited 15 months—not one or two months—of single-figure inflation, a buoyant pound, which ought to have had a favourable influence on the rate of inflation, and no crisis over droughts or a hard winter, which affect vegetable prices and so on. But despite many favourable influences, the rate of inflation has doubled in a year.
That is not our only charge. We make four charges—the rate of inflation has doubled, the increase is largely of the Government's own creation, the rate of inflation is getting worse and not better, and the Government have no credible, workable or acceptable strategy for dealing with the matter.
The fact that the inflation rate has doubled is beyond dispute. It is shown by the figures published by the Government and the price surveys that the Minister has been anxious to suppress—thank goodness we still have them in Lambeth. It is shown by people's experience when they go shopping, and it would be shown by the Minister's personal price index if she still produced it.
In opposition, the right hon. Lady had a rather curious index. It included one bottle of brandy, one bottle of gin, one bottle of whisky and one pint of beer. It seems that the right hon. Lady thinks that the working class in Gloucester either drink their beer out of sherry glasses or drink their brandy out of half-pint pots.
The Minister used to give Christmas messages and surveys to her constituents. She said that things could be worse; unemployment could be high and they could be out of a job. That rings pretty hollow now. The right hon. Lady did not produce her index last Christmas, but The Times did it for her and told us that her Christmas message was devoted to safety and did not mention prices. The report added that the index devised by the right hon. Lady showed that
Christmas is still getting costlier under the Conservatives.
I believe that the right hon. Lady made a contribution to inflation through the expectations that she created when in opposition. There was not a single
occasion on which she did not attempt to denigrate the efforts of the previous Government to combat inflation or try to bring the Government down on the subject.
When the right hon. Lady got into office, she immediately vetoed a Price Commission investigation into the price of bread. Within 10 months we have this week the 2½p increase on the price of a loaf of bread, which would have made her apoplectic if she had still been in opposition.
The right hon. Lady savaged consumer services by reducing the number of consumer advice bureaux and savaged price surveys. Her crowning achievement is that, with the full blessing of the Prime Minister, she has no responsibility for answering general questions about prices. That was her " personal best " in the inflation athletics race.
Our second charge is that much of the rise in the rate of inflation has been the creation of the Government. The abolition of price controls had an effect which was greater than the mere measurable effect. It created inflationary expectations. The most immediate and dramatic twist was the Chancellor of the Exchequer's first Budget and the rise in VAT, which gave an immediate twist to inflation of about 4 per cent. and created an inflationary fall-out which has not yet settled. The precedent of the 1979 Budget was repeated in the 1980 Budget. It was a reckless and doctrinaire change, coming only weeks after the Chancellor had denied that there would be a doubling in the rate of VAT. He did not call the Labour Party liars, but he came close to it.
The Paymaster-General—the Minister of Information—had no such inhibitions on our accusation that prescription charges would go up. He said in a Tory Party handout that a Labour Party leaflet had said:
The Tories have planned... increasing prescription charges by 300 per cent.
The right hon. Gentleman said that that was " a direct lie ". I suppose that it was, in a sense, because those charges have gone up by 500 per cent.
Those were the contributions from the shift in taxation in the Budgets. Many of the increases to which the Government have contributed come from their fascination with, and fanatical attachment to, monetary policy. The rise in the minimum lending rate to 17 per cent. has placed a substantial burden on every consumer of credit and on virtually every owner-occupier in this country. The gross extra cost of repaying a mortgage of £15,000 is £36·75 a month. That was a substantial increase in inflation which was due to monetary policy and interest rates.
The Government did not hit only the owner-occupiers. Monetary policies have extended to the cutting of housing subsidies. As a result of Government decree, virtually every council tenant will pay an extra £2 a week in rent—£100 a year—and that has not yet come into the cost of living index.
The cuts in rate support grant will increase the rates for every family by £40 per household, according to the borough treasurers. Of course, the old Tory doctrine is " the poorer you are, the harder we will hit you " and in inner city areas the rate rises will be even higher. That has also not yet got into the cost of living index.
The gas price rise is another extension of monetary policy. The Secretary of State for Energy said that the increased profits that would result from a 30 per cent. increase, in real terms, in the price of gas
will make an important contribution to the Government's central economic objective of holding down the public sector borrowing requirement."—[Official Report, 29 January 1980, Vol. 977, c. 1048.]
The gas and electricity price increases are as much a measure of monetary policy as a measure of conservation. They will also contribute to the inflation rate.
The Government are hooked on monetary policy. They may as well be hooked on LSD. They are under the hallucination that by putting prices up one somehow brings down the rate of inflation.
The next charge I make is that there is no immediate sign of abatement. Many of the Budget increases have not yet got into the index—the gas price increase, the increase in rents, and the increase in other charges. Given the Government's monetary policy and the lack of matching of the demand for home loans and the supply of money into the building societies, who is to say that the mortgage interest rate will not rise again? These things have yet to find their way into the inflation figures.
The Chancellor has forecast that in some areas wages will rise by 25 per cent. That is normally followed by a rise in the inflation rate of the same figure, particularly in circumstances in which he forecasts an overall drop in output of 2½ per cent., and, if one excludes the production of North Sea oil, a drop in manufacturing output of about 6 per cent. That means, in turn, much less chance for increases in productivity when the market is shrinking, and that means, in turn, much higher unit costs. That is yet to flow through as a result of the policies being pursued by the present Government.
I come to the last and most serious charge. It is that the Government have no workable or acceptable strategy for dealing with inflation. We had not one believable word from the right hon. Lady in her speech this afternoon. We have only the policy as it was described in the Yorkshire Post on Monday of this week by the Chancellor of the Exchequer, who said that
we have to reduce inflation and to create the conditions in which economic growth can be sustained ".
That I agree with 100 per cent. He went on to say:
The attack on inflation, which is our main priority, is being pursued through firm control of the money supply.
That appears to be the only policy. I do not say that it is credible or acceptable, but it is the only policy according to the Chancellor.
The Guardian of Monday tells a different story. According to the Chief Secretary to the Treasury, there is no mechanistic link between changes in money supply and the rate of inflation. After the " three years' austerity " speech, I suppose that the Chief Secretary has become the St. Paul of the Conservative Party. When I read those words in The Guardian on Monday, I wondered whether he had seen the blinding light on the road back from Chicago. If that is so, and if we follow biblical precedent, he will soon be let down from the walls of the Treasury in a redundant shopping basket provided by the right hon. Lady.
However, returning to the view of the Chancellor of the Exchequer, and even if we were to accept his view that monetary policy can bring down the rate of inflation, I say that the casualties and the damage that would be done as a result of trying to get inflation down in that way are not worth the paying. It is the philosophy of trench warfare, in which one is prepared to sacrifice thousands of people—people sacrificed to unemployment, to homelessness, and to cuts in their services—without winning an inch of ground. On the most favourable construction, that is the best that we can say of the Chancellor's policy.
The Conservative Party has accused my right hon. Friend the former Chancellor of the Exchequer of following a monetarist policy, but I think that the difference is this—and one can illustrate it by a drug called Warfarin. The drug that (he Conservatives have is class Warfarin, not just Warfarin. Used in small quantities, Warfarin can cure or assist in alleviating diseases of circulation. Used in large quantities, it is a well-known form of rat poison. Monetary policy, since that is the only thing upon which the Conservatives rely, and in the quantities in which they rely upon it, is a kind of social rat poison being injected into this country. The casualties that we shall suffer as a result of the use of that policy are too high to bear.
My concern is that I believe that the Conservative Party has sown the seeds already of its own destruction. That does not worry me too much. What worries me is that the Conservatives have also sown the seeds of the destruction of this country, in terms of not only high inflation but industrial dereliction and the suffering of working people. It is for that reason that I urge the House to accept the motion.
The first question that one must ask this evening is just how serious the Opposition are in tabling this motion. They are not very serious, in my judgment. All through the afternoon we had a lot of talk about double digit inflation. Until the hon. Member for Norwood (Mr. Fraser) rose to speak, I do not think that the Opposition mustered a double digit roll of Members on their Benches. At one time there were three, then five, and then there was the big deal when the number went up to six, I think—[Interruption.] My hon. Friends did not table the motion. They are not criticising the Government in this matter.
I am glad that the hon. Gentleman has done something from the Opposition Benches in the cause of truth this afternoon, because no one else did.
The Opposition even chose a Thursday afternoon for this debate knowing that they would be able to escape half an hour of it because of business questions, and hoping that there would be a ministerial statement to enable them to avoid another half hour's embarrassment, so that they would not have to keep up a show of synthetic indignation for more than two and a half hours. As if that were not enough to show their lack of interest in the matter, they put up as their spokesman a pair of the nicest, most amiable and most good-natured chaps to speak for them, the right hon. Member for Lanarkshire, North (Mr. Smith) and the hon. Member for Norwood. Amidst all the thugs that the Opposition could have chosen, they chose two really nice, pleasant, decent chaps to make attacks on her Majesty's Government.
I know that the right hon. Member for Lanarkshire, North tries to be indignant. But the most that he could manage was to read extracts from bygone copies of The Daily Telegraph. That was the whole cutting edge of his attack on the Government.
Of course, the right hon. Gentleman could not bring himself to speak of those dastardly events between 1974 and 1979, but I had a feeling that he could remember them and that that was what was inhibiting him from making any attack on the present Government over price increases. Yes—he takes some pride now in being a member of a former Government in which he voted, as has been said, for a 108 per cent. increase in school meal prices. After all, it was below the level of inflation generally. Why should he not take some pride in that? Prices in general rose by 110 per cent.
A lot more sense began to emerge when the right hon. Member for Orkney and Shetland (Mr. Grimond) rose to speak. He rightly pointed out that if annual wage increases, without balancing production increases, are met by the creation of more money, that can only create inflation; and if not, unemployment is the result. Of course, the right hon. Gentleman strikes a most responsive chord on the Conservative Benches when he says that. From time to time, he might have struck a responsive chord on the Opposition Benches. I remember the previous Prime Minister, speaking on the BBC programme " The World this Weekend ", two years ago, saying
30 per cent. wage increases—roughly 30 per cent. price increases. Five per cent. wage increases—roughly 5 per cent. price increases. Ten per cent. wage increases—roughly 10 per cent. price increases.
That was the Labour Government's view. But have the present Opposition done anything in the last 10 or 12 months—[HON. MEMBERS: " You are the Government."]—to persuade their friends in the TUC that that is as true under a Conservative Government as it was under a Labour Government? What assistance did they give us in helping to reach an honourable settlement in the steel dispute? Not a scrap.
My hon. Friend the Member for Loughborough (Mr. Dorrell) was right to say that the Labour Party has two economic policies. He was accurate in saying that neither has any chance of success. They have been tried often enough. My hon. Friend the Member for Coventry, South-West (Mr. Butcher) spoke undeniable and undiluted common sense.
The hon. Member for West Bromwich, West (Miss Boothroyd) talked about public concern about petrol prices. How can that be when people will drive past a garage selling petrol at £1.30 and pull into the one just 100 yards up the road and pay £1·40? She expressed her usual child-like diatribe against profits. From exactly where does she expect the money will come to invest thousands of millions of pounds in new North Sea oilfields to keep up the supply of oil, unless it comes from oil companies' profits?
The hon. Lady has little idea of what it costs to develop a North Sea oilfield if she believes that such a profit is excessive. It is infantile to express pride in what is being done in the North Sea and to attack oil companies' profits. Does the hon. Lady want to end investment in the North Sea?
She has no more understanding than the hon. Member for Aberdare (Mr. Evans). His case was that inflation was going down when the last Government left office—but it was going up. I do not need to waste much time on him. He gave a heart-rending account of poverty striking the honest citizens of Aberdare who find that VAT on colour televisions and motor cars is more than they can bear. If that is the extent of poverty in Aberdare I wish it extended to other parts of the country. There are real problems in many places. It is fanciful to base a case on the price of colour televisions and motor cars.
I cannot be bothered to deal with the little ones. Even the boast by the hon. Member for Aberdare that his Government were holding wages down was empty. I am not sure that that was the boast that he made on the election platform a year ago. One can imagine him going round Aberdare at that time. He would say to the electors " This Government, whom I have supported throughout five difficult years, have a great claim to your support—they held down your wages and will continue to do so." That was not the speech that he made, nor was it that of the former Prime Minister in 1974 in Aberdare when he was stirring up the miners. He said that to talk of wages having an effect on inflation was bunk. That contrasted with what he learned afterwards at the feet of the IMF.
I should have been glad to give way to the hon. Gentleman had we had more time, but 15 minutes is not long in which to deal with a whole debate.
Have the Opposition offered any credible alternatives? They had some liking for rat poison in small doses in the last Labour Cabinet. Perhaps that is why their majority gradually dwindled away. The hon. Member for Norwood gave his usual performance. He was so like Iain Macleod's sundial in the old days. He used to count only the sunny hours. Now he can see nothing but gloom in the world, but he cannot offer us a credible alternative. Did he commit his party to cutting VAT? If he did, did he say how that revenue would be replaced? Would it be from extra income tax, or would a Labour Government just print and borrow again? Do Labour Members still believe that wage rises generate inflation? If so, they are not doing much to control them. Do they still support restraint in wage demands? Some of them rail against high food prices from protected agriculture industries. They are usually the Members who want to shut out imports of cheap clothing and other consumer goods. They want it both ways. They even wanted to shut out such cheap energy as coal. Would they cut gas prices? From where would they raise the cash to replace the money that is flowing into the Treasury from the increase in gas prices?
To my astonishment the hon. Member for Norwood mentioned the impact of rates on the cost of living. That was pretty bold. I shall invite him to come to my constituency. Let him talk to the people of Chingford who live in the London borough of Waltham Forest under a Labour council and face a rate increase of 43 per cent. this year. I shall also take him to see the constituents of my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) who live next door in the borough of Redbridge which has a Tory council and a rate increase of 20 per cent. Who is to be blamed for the high cost of living caused by rate increases? The hon. Member knows that such figures are true across the country. Town halls run by the Labour party—padded, fat and obese—have made no attempt to control expenditure. They are shoving rising prices on to the backs of the unfortunate ratepayers. That is the perfect example of what we can expect if we experience another Labour Government.
The cause of today's inflation is the vast excess of money which is beyond that justified by the level of production.
That excess of money springs entirely from the spillage of money into the economy in 1979 as part of the last Government's election campaign. How I wish that the former Prime Minister had made up his mind to call an election earlier than he did. That would have resulted in a much easier time for us because he would not have poured so much excess money into the country in the campaign.
My right hon. Friend the Minister spoke about post-dated cheques. The Labour Government did not leave us only post-dated cheques; they left us Professor Clegg to fill in the figures. It is the most juvenile distortion of reality to suggest that it is practicable to reduce the rate of creation of money, to soak up the excess money in the economy, to take action about the padded spending programmes in Whitehall and the town halls overnight.
It is plain dishonest to attack expenditure without advocating higher taxes or borrowing with the accompanying high interest rates. Changing the direction of an economy is a slow process. We have changed the direction of the economy and we shall reap the benefits in the years to come. The motion should be rejected, not only with contempt but with total contempt because of the half-hearted way in which it was moved.
|Division No. 266]||AYES||[7 pm|
|Abse, Leo||Cartwright, John||Dubs, Alfred|
|Adams, Allen||Clark, Dr David (South Shields)||Dunn, James A. (Liverpool, Kirkdale)|
|Allaun, Frank||Cocks, Rt Hon Michael (Bristol S)||Dunnett, Jack|
|Anderson, Donald||Cohen, Stanley||Dunwoody, Mrs Gwyneth|
|Archer, Rt Hon Peter||Coleman, Donald||Eadie, Alex|
|Armstrong, Rt Hon Ernest||Concannon, Rt Hon J. D.||Eastham, Ken|
|Ashley, Rt Hon Jack||Conlan, Bernard||English, Michael|
|Ashton, Joe||Cook, Robin F.||Ennals, Rt Hon David|
|Atkinson, Norman (H'gey, Tott'ham)||Cowans, Harry||Evans, loan (Aberdare)|
|Bagier, Gordon A. T.||Craigen, J. M. (Glasgow, Maryhill)||Evans, John (Newton)|
|Barnett, Guy (Greenwich)||Crowther, J. S.||Ewing, Harry|
|Bennett, Andrew (Stockport N)||Cryer, Bob||Faulds, Andrew|
|Bidwell, Sydney||Cunliffe, Lawrence||Field, Frank|
|Booth, Rt Hon Albert||Cunningham, George (Islington S)||Fitt, Gerard|
|Boothroyd, Miss Betty||Cunningham, Dr John (Whitehaven)||Flannery, Martin|
|Bottomley, Rt Hon Arthur (M'brough)||Dalyell, Tarn||Fletcher, Ted (Darlington)|
|Bradley, Tom||Davidson, Arthur||Foot, Rt Hon Michael|
|Bray, Dr Jeremy||Davies, Rt Hon Denzil (Llanelll)||Ford, Ben|
|Brown, Hugh D. (Provan)||Davies, Ifor (Gower)||Forrester, John|
|Brown, Robert C. (Newcastle W)||Davis, Clinton (Hackney Central)||Foster, Derek|
|Brown, Ron(Edinburgh, Leith)||Davis, Terry (B'rm'ham, Stechford)||Fraser, John (Lambeth, Norwood)|
|Buchan, Norman||Deakins, Eric||Freeson, Rt Hon Reginald|
|Callaghan, Rt Hon J. (Cardiff SE)||Dean, Joseph (Leeds West)||Garrett, John (Norwich S)|
|Callaghan, Jim (Middleton & P)||Dempsey, James||George, Bruce|
|Campbell, Ian||Dixon, Donald||Gilbert, Rt Hon Dr John|
|Campbell-Savours, Dale||Dobson, Frank||Ginsburg, David|
|Canavan, Dennis||Dormand, Jack||Golding, John|
|Cant, R. B.||Douglas, Dick||Gourlay, Harry|
|Carmichael, Nell||Douglas-Mann, Bruce||Graham, Ted|
|Grant, George (Morpeth)||Marks, Kenneth||Sheldon, Rt Hon Robert (A'ton-u-L.)|
|Grant, John (Islington C)||Marshall, David (Gl'sgow, Shettles'n)||Shore. Rt Hon Peter (Step and Pop)|
|Hamilton, James (Bothwell)||Marshall, Dr Edmund (Goole)||Short. Mrs Renée|
|Hamilton, W. W. (Central Fife)||Marshall, Jim (Leicester South)||Silkin, Rt Hon John (Deptford)|
|Harrison, Rt Hon Walter||Martin, Michael (Gl'gow, Springb'rn)||Silkin, Rt Hon S.C. (Dulwich)|
|Hattersley, Rt Hon Roy||Mason, Rt Hon Roy||Silverman, Julius|
|Haynes, Frank||Maxton, John||Skinner, Dennis|
|Healey, Rt Hon Denis||Meacher, Michael||Smith, Rt Hon J. (North Lanarkshire)|
|Heffer, Eric S.||Mellish, Rt Hon Robert||Snape, Peter|
|Holland, Stuart (L'beth, Vauxhall)||Mikardo, lan||Soley, Clive|
|Home Robertson, John||Mitchell, Austin (Grimsby)||Spearing, Nigel|
|Homewood, William||Mitchell, R. C. (Soton, lichen)||Spriggs, Leslie|
|Hooley, Frank||Morris, Rt Hon Alfred (Wythenshawe)||Stallard, A. W.|
|Horam, John||Morris, Rt Hon Charles (Openshaw)||Stewart, Rt Hon Donald (W Isles)|
|Howell, Rt Hon Denis (B'ham, Sm H)||Morton, George||Stoddart, David|
|Huckfield, Les||Moyle, Rt Hon Roland||Stott, Roger|
|Hudson Davies, Gwilym Ednyfed||Newens, Stanley||Strang, Gavin|
|Hughes, Mark (Durham)||Oakes, Rt Hon Gordon||Straw, Jack|
|Hughes, Robert (Aberdeen North)||Ogden, Eric||Summerskill. Hon Dr Shirley|
|Hughes, Roy (Newport)||O'Halloran, Michael||Taylor, Mrs Ann (Bolton West)|
|Janner, Hon Greville||O'Neill, Martin||Thomas, Jeffrey (Abertillery)|
|Jay, Rt Hon Douglas||Orme, Rt Hon Stanley||Thomas, Mike (Newcastle East)|
|John, Brynmor||Owen, Rt Hon Dr David||Thomas, Dr Roger (Carmarthen)|
|Jones, Barry (East Flint)||Palmer, Arthur||Tilley, John|
|Jones, Dan (Burnley)||Park, George||Torney, Tom|
|Kaufman, Rt Hon Gerald||Parker, John||Varley, Rt Hon Eric G.|
|Kerr, Russell||Parry, Robert||Wainwright, Edwin (Dearne Valley)|
|Kilfedder, James A.||Pendry, Tom||Walker. Rt Hon Harold (Doncaster)|
|Kilroy-Silk, Robert||Powell, Raymond (Ogmore)||Watkins, David|
|Lamborn, Harry||Prescott, John||Wellbeloved, James|
|Lamond, James||Race, Reg||Welsh, Michael|
|Leighton, Ronald||Radice, Giles||White, Frank R. (Bury & Radcliffe)|
|Lestor, Miss Joan (Eton & Slough)||Rees, Rt Hon Merlyn (Leeds South)||White, James (Glasgow, Pollok)|
|Lewis, Arthur (Newham North West)||Richardson, Jo||Whitehead, Phillip|
|Lewis, Ron (Carlisle)||Roberts, Albert (Normanton)||Whitlock, William|
|Litherland, Robert||Roberts, Allan (Bootle)||Wigley, Dafydd|
|Lofthouse, Geoffrey||Roberts, Ernest (Hackney North)||Williams, Rt Hon Alan (Swansea W)|
|Lyon, Alexander (York)||Roberts, Gwilym (Cannock)||Wilson, Gordon (Dundee East)|
|Lyons, Edward (Bradford West)||Robertson, George||Wilson. William (Coventry SE)|
|Mabon, Rt Hon Dr J Dickson||Robinson, Geoffrey (Coventry NW)||Winnick, David|
|McDonald, Dr Oonagh||Rodgers, Rt Hon William||Woodall, Alec|
|McElhone, Frank||Rooker, J. W.||Woolmer, Kenneth|
|McKay, Allen (Penistone)||Roper, John||Wrigglesworth, Ian|
|McKelvey, William||Ross, Ernest (Dundee West)||Wright, Sheila|
|MacKenzie, Rt Hon Gregor||Ross, Stephen (Isle of Wight)||Young, David (Bolton East)|
|Maclennan, Robert||Rowlands, Ted|
|McNally, Thomas||Ryman, John||TELLERS FOR THE AYES:|
|McNamara, Kevin||Sandelson, Neville||Mr. Hugh McCartney and|
|McWilliam, John||Sever, John||Mr. James Tinn|
|Magee, Bryan||Sheerman, Barry|
|Adley, Robert||Brooke, Hon Peter||Critchley, Julian|
|Aitken, Jonathan||Brotherton, Michael||Crouch, David|
|Alexander, Richard||Brown, Michael (Brigg & Sc'thorpe)||Dean, Paul (North Somerset)|
|Amery, Rt Hon Julian||Browne, John (Winchester)||Dorrell, Stephen|
|Ancram, Michael||Bruce-Gardyne, John||Douglas-Hamilton, Lord James|
|Arnold, Tom||Bryan, Sir Paul||Dover, Denshore|
|Aspinwall, Jack||Buchanan-Smith, Hon Alick||du Cann, Rt Hon Edward|
|Atkins, Rt Hon H. (Spelthorne)||Buck, Antony||Dunn, Robert (Dartford)|
|Atkins, Robert (Preston North)||Budgen, Nick||Durant, Tony|
|Baker, Kenneth (St. Marylebone)||Bulmer, Esmond||Dykes, Hugh|
|Baker, Nicholas (North Dorset)||Burden, F. A.||Eden, Rt Hon Sir John|
|Beaumont-Dark, Anthony||Butcher, John||Edwards, Rt Hon N. (Pembroke)|
|Bell, Sir Ronald||Butler, Hon Adam||Eggar, Timothy|
|Bendall, Vivian||Cadbury, Jocelyn||Elliott, Sir William|
|Benyon, Thomas (Abingdon)||Carlisle, John (Luton West)||Eyre, Reginald|
|Benyon, W. (Buckingham)||Carlisle, Kenneth (Lincoln)||Fairbairn, Nicholas|
|Biffen, Rt Hon John||Carlisle, Rt Hon Mark (Runcorn)||Fairgrieve, Russell|
|Biggs-Davison, John||Chalker, Mrs Lynda||Faith, Mrs Sheila|
|Blackburn, John||Channon, Paul||Fell, Anthony|
|Blaker, Peter||Chapman, Sydney||Fenner, Mrs Peggy|
|Body, Richard||Churchill, W. S.||Finsberg, Geoffrey|
|Bonsor, Sir Nicholas||Clark, Hon Alan (Plymouth, Sutton)||Fisher, Sir Nigel|
|Boscawen, Hon Robert||Clark, Sir William (Croydon South)||Fletcher, Alexander (Edinburgh N)|
|Bottomley, Peter (Woolwich West)||Clarke, Kenneth (Rushcliffe)||Fletcher-Cooke, Charles|
|Bowden, Andrew||Clegg, Sir Walter||Fookes, Miss Janet|
|Boyson, Dr Rhodes||Cockeram, Eric||Forman, Nigel|
|Bradford, Rev R.||Colvin, Michael||Fowler, Rt Hon Norman|
|Braine, Sir Bernard||Cope, John||Fox, Marcus|
|Bright, Graham||Cormack, Patrick||Fraser, Rt Hon H. (Stafford & St)|
|Brinton, Tim||Corrie, John||Fraser, Peter (South Angus)|
|Brittan, Leon||Costain, A. P.||Fry, Peter|
|Brocklebank-Fowler, Christopher||Cranborne, Viscount||Galbraith, Hon T. G. D.|
|Gardiner, George (Reigate)||McQuarrie, Albert||Rossi, Hugh|
|Gardner, Edward (South Fylde)||Madel, David||Rost, Peter|
|Garel-Jones, Tristan||Major, John||Sainsbury, Hon Timothy|
|Gilmour, Rt Hon Sir Ian||Marland, Paul||Scott, Nicholas|
|Glyn, Dr Alan||Marlow, Tony||Shaw, Giles (Pudsey)|
|Goodhart, Philip||Marshall, Michael (Arundel)||Shelton, William (Streatham)|
|Goodhew, Victor||Marten, Neil (Banbury)||Shepherd, Colin (Hereford)|
|Goodlad, Alastair||Mates, Michael||Shepherd, Richard (Aldridge-Br-hills|
|Gorst, John||Mather, Carol||Shersby, Michael|
|Gow, lan||Maude, Rt Hon Angus||Silvester, Fred|
|Gower, Sir Raymond||Mawby, Ray||Sims, Roger|
|Gray, Hamish||Mawhinney, Dr Brian||Skeet, T. H. H.|
|Greenway, Harry||Maxwell-Hyslop, Robin||Speed, Keith|
|Griffiths, Eldon (Bury St Edmunds)||Mayhew, Patrick||Speller Tony|
|Griffiths, Peter (Portsmouth N)||Mellor, David||Spence, John|
|Grist, Ian||Meyer, Sir Anthony||Spicer, Jim (West Dorset)|
|Grylls, Michael||Miller, Hal (Bromsgrove & Redditch)||Spicer, Michael (S Worcestershire)|
|Gummer, John Selwyn||Mills, lain (Meriden)||Sproat, lain|
|Hamilton, Hon Archie (Eps'm&Ew'll)||Mills, Peter (West Devon)||Squire, Robin|
|Hamilton, Michael (Salisbury)||Miscampbell, Norman||Stanbrook, Ivor|
|Hampson, Dr Keith||Mitchell, David (Basingstoke)||Stanley, John|
|Hannam, John||Moate, Roger||Steen, Anthony|
|Haselhurst, Alan||Molyneaux, James||Stevens, Martin|
|Hastings, Stephen||Monro, Hector||Stewart, Ian (Hitchin)|
|Hawksley, Warren||Montgomery, Fergus||Stewart, John (East Renfrewshire)|
|Hayhoe, Barney||Moore, John||Stokes, John|
|Heath, Rt Hon Edward||Morgan, Geraint||Stradling Thomas, J.|
|Heddle, John||Morris, Michael (Northampton, Sth)||Tapsell, Peter|
|Henderson, Barry||Morrison, Hon Charles (Devizes)||Taylor, Robert (Croydon NW)|
|Heseltine, Rt Hon Michael||Morrison, Hon Peter (City of Chester)||Taylor, Teddy (Southend East)|
|Hicks, Robert||Murphy, Christopher||Tebbit, Norman|
|Higgins, Rt Hon Terence L.||Myles, David||Temple-Morris, Peter|
|Hogg, Hon Douglas (Grantham)||Needham, Richard||Thatcher, Rt Hon Mrs Margaret|
|Holland, Philip (Carlton)||Nelson, Anthony||Thomas, Rt Hon Peter (Hendon S)|
|Hooson, Tom||Neubert, Michael||Thompson, Donald|
|Hordern, Peter||Newton, Tony||Thorne, Nell (Ilford South)|
|Howell, Rt Hon David (Guildford)||Normanton, Tom||Thornton, Malcolm|
|Howell, Ralph (North Norfolk)||Nott, Rt Hon John||Townend, John (Bridlington)|
|Hunt, David (Wirral)||Oppenheim, Rt Hon Mrs Sally||Townsend, Cyril D. (Bexleyheath)|
|Hunt, John (Ravensbourne)||Trippier, David|
|Hurd, Hon Douglas||Trotter, Neville|
|Irving, Charles (Cheltenham)||Page, Richard (SW Hertfordshire)||van Straubenzee, W. R.|
|Jenkin, Rt Hon Patrick||Parkinson, Cecil||Vaughan, Dr Gerard|
|Johnson Smith, Geoffrey||Parris, Matthew||Viggers, Peter|
|Jopling, Rt Hon Michael||Patten, Christopher (Bath)||Waddington, David|
|Kaberry, Sir Donald||Patten, John (Oxford)||Wakeham, John|
|Kimball, Marcus||Pattie, Geoffrey||Waldegrave, Hon William|
|King, Rt Hon Tom||Pawsey, James||Walker, Rt Hon. Peter (Worcester)|
|Kitson, Sir Timothy||Percival, Sir Ian||Walker, Bill (Perth S E Perthshire)|
|Lamont, Norman||Peyton, Rt Hon John||Walker-Smith, Rt Hon Sir Derek|
|Lang, Ian||Pink, R. Bonner||Waller, Gary|
|Langford-Holt, Sir John||Pollock, Alexander||Walters, Dennis|
|Latham, Michael||Porter, George||Ward, John|
|Lawrence, Ivan||Powell, Rt Hon J. Enoch (S Down)||Warren, Kenneth|
|Lawson, Nigel||Prentice, Rt Hon Reg||Watson, John|
|Lee, John||Price, David (Eastleigh)||Wells, John (Maidstone)|
|Lennox-Boyd, Hon Mark||Prior, Rt Hon James||Wells, Bowen (Hert'rd & Stev'nage)|
|Lester, Jim (Beeston)||Proctor, K. Harvey||Wheeler, John|
|Lloyd, Ian (Havant & Waterloo)||Pym, Rt Hon Francis||Whitelaw, Rt Hon William|
|Lloyd, Peter (Fareham)||Raison, Timothy||Whitney, Raymond|
|Loveridge, John||Rathbone, Tim||Wickenden, Keith|
|Luce, Richard||Rees, Peter (Dover and Deal)||Williams, Delwyn (Montgomery)|
|Lyell, Nicholas||Renton, Tim||Winterton, Nicholas|
|McCrindle, Robert||Rhodes James, Robert||Wolfson. Mark|
|McCusker, H.||Rhys Williams, Sir Brandon||Young, Sir George (Acton)|
|Macfarlane, Neil||Ridley, Hon Nicholas||Younger, Rt Hon George|
|MacGregor, John||Ridsdale, Julian|
|MacKay, John (Argyll)||Rippon, Rt Hon Geoffrey||TELLERS FOR THE NOES:|
|Macmillan, Rt Hon M. (Farnham)||Roberts, Michael (Cardiff NW)||Mr. Spencer Le Marchant and|
|McNair-Wilson, Michael (Newbury)||Roberts, Wyn (Conway)||Mr. Anthony Barry.|
|McNair-Wilson, Patrick (New Forest)|