I understand that following the downward slide that we inherited from the previous Government it will take a little time to get up the hill if we are to see the promised land, but does not my right hon. and learned Friend accept that, if industrial and commercial confidence is to return, it must be made clear to industry that we shall soon get out of our inflationary difficulties? Industry will invest when it has hope. Hope is important as a basis for the revival of British industry.
I am glad to bear in mind the points made by my hon. Friend and to remind him that the downturn in inflation that we saw this month is the first such downturn for two years. I expect to see a further substantial drop in the rate of inflation next month. The fact that it is now two years since the rate began to go up is indicative of the fact that all economic policies are bound to take time to work out.
Is it not the case that the fall in the rate of inflation this month is due entirely to world prices, a factor which is beyond the Government's control, that the fall next month will be due entirely to the fact that the Chancellor has learnt enough not to be as lunatic as he was last year in doubling the rate of value added tax, which then falls out of the index, and that the main effect of the Government's policies so far is to produce unemployment at the level of 1936 and to condemn a whole generation of youngsters to the scrapheap?
There is concern on both sides of the House about the need to secure a downward movement in unemployment. But, as the right hon. Gentleman told the House on many occasions, the conquest of inflation must precede the conquest of unemployment. When we came into office we inherited a rapidly growing rate of inflation, running at almost 14 per cent. Now, after two years of movement in the wrong direction, we have begun to move in the right direction. We are entitled to take credit for that.
In considering the Government's economic policy, does my right hon. and learned Friend accept that there is considerable cause for concern about the very high interest costs that future Governments, as well as the present Government, will have to bear on long-term Government gilt-edged stock? Does he accept that there is now a strong case at least for index linking long-term gilts?
I appreciate the point made by my hon. Friend about the concern felt about the burden of interest, which is one of the reasons why it is important to reduce the total size of Government borrowing along the lines that we have in mind. The point that he makes about the indexation of gilts has been put forward in many quarters and deserves consideration, but there are many complications on the other side of the account.
Is the Chancellor aware of the pressure that is being put upon workers to accept smaller wage increases, and that the message seems to be coming right across the nation? Does it also include managers, directors, and all the rest of the people who totally ignore that sort of recommendation and who get away with murder and have done so for many years?
The hon. Gentleman puts an emotional gloss on the realities. I am grateful to him for telling the House in such plain terms that the message is, as he put it, getting across to the nation in support of the case that there must be moderation in the acceptance of and bargaining for pay settlements at all levels. At every level and in every workplace, people, when determining their pay, must take account of the impact of that on the prospects of their own employment.