Inflation

Oral Answers to Questions – in the House of Commons at 12:00 am on 24th July 1980.

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Photo of David Winnick David Winnick , Walsall North 12:00 am, 24th July 1980

5. Mr. Winnick asked the Chancellor of the Exchequer when he expects a substantial reduction in inflation.

Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey

I expect a substantial fall in the annual rate of increase of the retail price index next month.

Photo of David Winnick David Winnick , Walsall North

Since the Government were directly responsible for inflation reaching nearly 22 per cent., they can hardly be congratulated now on the fact that there is a tiny reduction. Is the right hon. and learned Gentleman aware that the economic policies of the Government, which are leading to a return of mass unemployment, will leave behind a legacy of hatred and bitterness towards the Tory Party of the sort that was seen in the 1930s?

Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey

The hon. Gentleman must understand that no Government policy is designed to lead or is leading to mass unemployment. As his right hon. Friend the Member for Leeds, East (Mr. Healey) told the House on many occasions, we have found ourselves entering each recession with a higher level of unemployment than on the previous occasion because we have attempted to spend our way out of recession and because of recurrent bouts of inflation. It is only by applying ourselves to the conquest of inflation—the subject of the original question—that we shall be able to deal with unemployment.

Photo of Nicholas Winterton Nicholas Winterton , Macclesfield

Does my right hon. and learned Friend agree that one of the best ways to achieve a reduction in the rate of inflation is to reduce direct taxation, which would reduce the working man's expectation of pay increases? Would that not also lead to production, which is different from productivity, and perhaps change the economic climate of Britain within 24 months?

Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey

My hon. Friend has listed several of the solid reasons in favour of reducing direct taxation. He must remember that, desirable as that objective is, it should not be achieved at the expense of greater borrowing, which would itself involve higher interest rates and, therefore, greater inflation. The two objectives must be balanced against each other.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

Does the right hon. and learned Gentleman accept the view that Mr. Frank Cassell of the Treasury put to the Select Committee last week—namely, that the rate of inflation could be over 26 per cent. if the Government had not permitted an increase in the value of the pound, which is now strangling British industry and producing excessive unemployment? By how much does he expect the rate of inflation to rise as a result of the fall in the value of the pound if he is successful in his other objective of reducing interest rates?

Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey

The right hon. Gentleman has attempted to condense a series of economic propositions into a short sentence. Our objective remains that of securing the reduction of inflation. We can resume discussion of the wider topics in next week's debate.

Photo of Mr Hilary Miller Mr Hilary Miller , Bromsgrove and Redditch

Does my right hon. and learned Friend understand the fear in manufacturing industry that is bearing the brunt of the Government's attack on inflation through high interest rates and that not enough has been done to control public expenditure and public borrowing? Will he comment on that?

Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey

I well understand the extent to which business, small and large, is concerned about the continuation of high interest rates. That is why our objective has been so firmly concentrated on the reduction of public borrowing and public spending. I am grateful to have my hon. Friend's support for that policy.