§ 3. Mr. Canavan
asked the Chancellor of the Exchequer what is the latest estimate of the rate of inflation.
§ The Chancellor of the Exchequer (Mr. Denis Healey)
The retail price index rose by 25.2 per cent. over the 12 months to November compared with October's figure of 25.9 per cent. The year-on-year rate of increase has now fallen in three successive months, and substantial further slowing down in the rate of inflation will follow if the £6 pay limit is observed as completely in future as it has been so far.
§ Mr. Canavan
In view of the OECD report published today, which forecasts a rate of inflation in 1976 of some 15¼ per cent. combined with a zero growth rate and with 1½ million unemployed, will my right hon. Friend abandon his policy of attempting to use unemployment to beat inflation? Does he realise that his statement yesterday was like a Christmas gift 1625 from Scrooge? Will he now try a policy of full employment combined with public ownership of the economy in order to beat inflation?
§ Mr. Healey
My hon. Friend has misquoted the OECD report on both the rate of inflation that it predicts for the coming year and on the increase in output. On the other hand, the report projects an increase in unemployment to nearly 1½ million by the end of the year, a greater rate of increase than I believe will take place. My hon. Friend must accept the view that I hold, which is held by the General Council of the TUC, that the cause of unemployment at present is primarily the international recession and that unemployment has been increased by excessive wage increases earlier in the year. I hope that we shall have his support, like that of the overwhelming mass of working people, in our fight to reduce the rate of inflation so that unemployment can also be reduced.
§ Mr. Lawson
Would it not be better for the Chancellor to come clean and admit that the reduction in the rate of inflation is a consequence of the recession? Will the tell the House what in his view is the cause of the rate of inflation? When he talks of the past rate of inflation, he tends to ascribe it to the money supply and the public sector borrowing requirement. When he is talking about the present rate of inflation, it seems to be the incomes policy. Can he reconcile his rather schizoid analyses?
§ Mr. Healey
Some day the hon. Gentleman may learn that major economic phenomena have more than one cause and that the mixture of causes varies from time to time, certainly from year to year and sometimes from month to month. Among the factors responsible for the current rate of inflation are the big increase in import prices over recent years, notably the increase in the price of oil, the excessive increase in the money supply, which was engineered by the previous Conservative Administration in 1973—on that element at least I think he and I are at one—and the excessive wage increases earlier this year. However, the hon. Gentleman's understanding of these matters will never advance unless he is prepared to recognise that complex phenomena have complex causes.
§ Mr. Mike Thomas
Will my right hon. Friend accept that an important part of his strategy for the next 12 months is the price restraint scheme? How does he propose to sell that scheme to private industry if, as appears to be the case, he has allowed the nationalised industries to escape it?
§ Mr. Healey
My hon. Friend is completely mistaken about the nationalised industries. Their price increases are as severely controlled by the Price Commission as those of any private firm. It is true that some nationalised industries' prices and charges have risen faster than those in the private sector, because the Government have set themselves on the path of phasing out the subsidies given to the nationalised industries by the previous Conservative Administration. However, I am told from time to time that we now have the support of the Opposition Front Bench.
§ Mr. Nott
Although we appreciate that the Chancellor's analysis of the causes of inflation varies from day to day to suit his arguments and those of the Labour Party, nevertheless can he quote the retail price index on a more consistent basis? At the time of the last General Election, he quoted it on a three-month basis to give him a rate of inflation of 8.4 per cent. Yesterday, he quoted it on a six-month basis in order to support his argument for a fall in the rate of inflation. Can it be given on a consistent basis so that the country can understand his policies and their degree of success?
§ Mr. Healey
I am always happy to be lectured on consistency by the hon. Gentleman who presided as a Minister in the Treasury over precisely that increase in the money supply which since the General Election he has stigmatised so fiercely. He says that he is concerned about the rate of increase in inflation and whether it is on a three-month, a six-month or a 12-month basis. I have given him the 12-month figure. The annual rate of increase over the past three months was only 14.8 per cent.