The retail prices index figures published this morning show that underlying inflation was 2.7 per cent. in May. Inflation has now been below 3 per cent. for 20 months, which is our best performance since 1961.
I congratulate my right hon. and learned Friend on his speech at the Mansion house last night. Does he agree that the careful control of inflation is absolutely essential for the promotion and protection of the prosperity of middle England, especially those on lower incomes?
I entirely agree with my hon. Friend. Anyone who aspires to govern this country and deliver the sustained recovery, without a return to boom and bust, that I think the population want must have a clear objective for inflation and must be capable of delivering it. We have a clear objective. We have been delivering low inflation. Those who criticise us appear to be incapable of making any useful contribution to the debate whatsoever.
Does the Chancellor accept that his 2.7 per cent. figure for underlying inflation is above his long-term target and that the Bank of England said last month that it would continue to be above his long-term target in two years' time? If that is the case next month, will he take action—yes or no? When he said that he was putting inflation back in the box, did he omit to tell us that there was no lid on the box?
If the Liberal party or the Labour party would give us any figures at all as a basis for their economic policy, we should be able to judge whether they were capable of getting within 0.2 per cent. of anything. The current position is that we have delivered the best record on inflation since the early 1960s. That is one of the principal reasons why our economy is growing and our prospects are looking so much better. Last night, I made it quite clear that I would set policy for the foreseeable future on the basis that we were aiming at inflation of 2½ per cent. or less. We aim to get there by the end of this Parliament and we shall aim to keep it there thereafter. That is a clear policy, and we are showing ourselves capable of delivering it.
I, too, congratulate my right hon. and learned Friend on the speech that he made last night, and especially on his statement that he wanted to follow the iron lady and become the iron Chancellor who is not for turning. Does he accept that I also welcome his warning to fellow Cabinet colleagues and, indeed, to Back-Bench colleagues, that he wants to cut taxes, but that he can do so only if he can cut spending?
My hon. Friend and I agree strongly on that point. The Government are showing that they are capable of controlling public spending in order to achieve our low taxation goal. We think that we shall have a more successful and competitive economy, with more prosperity and more secure jobs, if we can reduce the proportion of national resources taken by the state. It is yet another sphere in which, as far as I am aware, we do not have the slightest indication from the Opposition about what proportion of GDP they think should be taken by the state, what their objectives are for taxation or precisely what their views are on public spending, or at least how those of the Treasury relate to those of other Opposition spokesmen.
Will the Chancellor explain his extraordinary memorandum to Conservative Back Benchers last night? Why, having told the City that he would keep within his 4 per cent. inflation target all the time, did he say to his Back Benchers that he might meet it only most of the time? Why does he say one thing to the country and another in secret to the Conservative party?
The document to which the hon. Gentleman referred was not especially secret. The policy that it sets out is exactly the same as that about which I spoke last night. The inflation target is 2½ per cent. or less which will, in practice, deliver inflation within a range of 1 to 4 per cent. That is the policy that we have been pursuing successfully, and I projected it forward.
Will the hon. Gentleman explain his extraordinary silence on the whole matter? He cannot even reply to letters from me in which I asked what inflation target he has in mind or whether he agrees with the decision that I took on interest rates more than a month ago. There is no piece of paper containing any details of any Labour policy on any these issues.
I think that we should take a leaf out of the Opposition's book and ask the Leader of the Opposition to hold an independent inquiry into whether the shadow Chancellor has an economic policy and, if he claims to have an economic policy, whether he is prepared to put a figure to it. At the moment, I find myself facing shadows, but invisible shadows who will not put forward any proposition of their own. The hon. Gentleman has lost his way on economic policy.