Inflation

Oral Answers to Questions — National Finance – in the House of Commons at 12:00 am on 11th June 1992.

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Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington 12:00 am, 11th June 1992

To ask the Chancellor of the Exchequer, pursuant to the Prime Minister's oral answer of 21 May, Official Report, column 494, what evidence he has suggesting that inflation will fall to 1½ per cent. by mid 1993.

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester

The forecast for producer-price inflation is underpinned by the prospect of further marked improvement in unit labour cost performance. Lower wage settlements have still to feed through fully into earnings, and productivity will continue to recover.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

Is it not true that if producer-price inflation dropped to 1½ per cent., it would mean that the economy was flat on its back? Is it not also true that if the economy took off, inflation would inevitably rise because Britain has lost its productive capacity?

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester

I suggest to the hon. Gentleman that economies such as Germany and Japan, which have low producer-price inflation, can hardly be described as flat on their backs—far from it. Low inflation of both retail and producer prices is more likely to lead to sound economic growth.

Photo of Mr Keith Mans Mr Keith Mans , Wyre

Does my hon. Friend agree that long-term low inflation and long-term growth depend on our international competitiveness, which is a lot better now than a decade ago?

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester

My hon. Friend is absolutely right. Confidence is returning. That is reflected most markedly perhaps by the substantial and buoyant levels of inward investment.

Photo of Mr Rhodri Morgan Mr Rhodri Morgan , Cardiff West

Will the Chief Secretary have a word with the Prime Minister when he returns and tell him to desist from the practice of continually switching to the measure of inflation which gives the Government the greatest short-run presentational benefits? They switch from headline inflation to core inflation to underlying inflation and now to the new measure of factory gate inflation. To most people in the street, that means that the price of factory gates has fallen but nothing else. I understand that the word "portillo" means factory gate in Spanish, unless my Castilian has been struck by lightning. Perhaps that is one reason why the Government use that measure—I do not know—but I should be grateful if the Minister would have a word with the Prime Minister and tell him to stop trying to deceive the British public.

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester

The hon. Gentleman's complaint should be with not the Prime Minister but his hon. Friend the Member for Workington (Mr. Campbell-Savours), who asked the question about producer-price inflation. I am entitled to reply by pointing out that producer-price inflation, which was down to 2.7 per cent. in May, is the lowest for some 23 years. That is surely good news which the whole House welcomes.