HC Deb 21 July 1975 vol 896 cc5-12
1. Mr. Tebbit

asked the Secretary of State for Prices and Consumer Protection if she will estimate the extent to which retail prices may be expected to rise in the winter as a result of increased costs already incurred in manufacture and supply.

18. Mr. Lane

asked the Secretary of State for Prices and Consumer Protection what estimate she has made of the increase in the retail price index during the 12 months beginning in July 1975, compared with the previous 12 months.

The Secretary of State for Prices and Consumer Protection (Mrs. Shirley Williams)

The Government are determined to bring the rate of inflation down to 10 per cent. by the third quarter of 1976. It is not possible to forecast precisely the behaviour of the retail price index within that period but while the annual rate of inflation is likely to remain high for the rest of this year, the monthly rate this winter should not be much above 1 per cent., reflecting lower pay and commodity prices.

Mr. Tebbit

Why is the right hon. Lady so much less forthcoming and so much less optimistic than she was at that happy Press conference on 7th October last year—the 8.4 per cent. Press Conference—when she said that she saw no evidence at all that there were any price rises in the pipeline for the following winter? What has changed in the past eight months?

Mrs. Shirley Williams

The hon. Gentleman's memory is somewhat selective. I said nothing as incautious as he suggests. One of the points made quite clear by my right hon. Friend the Chancellor of the Exchequer in his remarks on the Budget earlier this year was that all our predictions would depend on the rate of wage and salary settlements. In addition, the hon. Gentleman might care to remember that there was an increase in oil prices last winter, a factor that we have had to take into account.

Mr. George Rodgers

Does my right hon. Friend agree that there have recently been announcements by several major food manufacturers of substantially increased profits? Can these manufacturers be directed to hold down prices in the food sector?

Mrs. Shirley Williams

My hon. Friend may not be aware that the Price Commission's report, to be published later this week, will indicate that the profits of food manufacturing companies have been halved in the past year. I think that the companies my hon. Friend quotes must be those which largely export rather than sell in the home market.

Mr. Lane

Does the right hon. Lady agree that even if the rate of inflation is brought down to 10 per cent. by this time next year it is still likely to be well above the rate of our main industrial competitors? Therefore, will the Government make it clear that if Britain's position is to be properly restored national restraint and the acceptance of lower living standards will be necessary not just for one year but for the next two or three years?

Mrs. Shirley Williams

I know that the hon. Gentleman would not like to mis record what I said. I referred to the third quarter of 1976, rather than this time next year. As we are being held very closely to our remarks, I hope that the hon. Gentleman will accept that correction. My right hon. Friend the Chancellor and I have made it clear that the 10 per cent. is an immediate target, and that we must proceed to the point where inflation ceases to be of any significance in our economy.

2. Mr. Peter Morrison

asked the Secretary of State for Prices and Consumer Protection by what percentage the retail price index has risen as compared with a year ago.

3. Mr. Rost

asked the Secretary of State for Prices and Consumer Protection what is the current annual rate of inflation based upon the rise in the retail price index over the past three months.

8. Mr. Jim Lester

asked the Secretary of State for Prices and Consumer Protection what has been the increase in the retail price index over the past 12 months.

12. Mr. Neuhert

asked the Secretary of State for Prices and Consumer Protection what is the current rate of inflation based on the last three months of the retail price index expressed at an annual rate.

23. Mr. MacGregor

asked the Secretary of State for Prices and Consumer Protection what is the latest percentage increase in the retail price index on a yearly basis.

Mrs. Shirley Williams

The retail price index for June was 261 per cent. higher than a year earlier. The change over the three months to June, expressed at an annual rate, was 48 per cent. But this includes the exceptional increase in May, which was substantially due to Budget changes in indirect taxation, and the annual rate based on the June increase alone is 21.9 per cent.

Mr. Morrison

Does the right hon. Lady accept that a rise of 26.3 per cent. in the retail price index is a pretty poor reflection on the Government's attempts to control inflation, and that the only way to stop the rot is for the Government to cease spending so much money?

Mrs. Shirley Williams

The hon. Gentleman must have tabled his Question and formulated his supplementary question before the Government's announcements in the White Paper " The Attack on Inflation ". It would be helpful to the Government if, in the attack on inflation, we had for once the support of the Opposition.

Mr. Rost

If the Government are really interested in attacking inflation, why do not they accept that indiscriminate, blanket food subsidies will only add to inflation? When will the right hon. Lady abandon the deception that she can hold down retail prices by spending public money in this way?

Mrs. Shirley Williams

It is not a deception. In a period when sacrifices have to be made, those least well off should be protected. That is why the Government are continuing food subsidies. That is why the Government believe that they are adopting the right policy.

Mr. Neubert

As inflation. on a three-months' basis, was 25.6 per cent. at the end of March, and as it is now, on the same basis, running at an annual rate of 48 per cent., does the right hon. Lady at least agree that the rate of inflation has nearly doubled in the past three months, and has gone up nearly six times since the Chancellor's pre-election statement of 8.4 per cent. last September? To whom does the right hon. Lady ascribe responsibility for this rapid acceleration?

Mrs. Shirley Williams

I shall give the hon. Gentleman the benefit of the doubt in trusting that he did not hear my final sentence, in which I pointed out that the annual rate of inflation, on a monthly basis, is now 21.9 per cent. For the hon. Gentleman to pretend that such things as increases in indirect taxes on hard drink and tobacco are in some curious way an essential part of what has happened to inflation will not do.

Mr. Ioan Evans

Does my right hon. Friend agree that if Opposition Members are expressing concern about the retail price index and calling for the removal of food subsidies, they must accept that if food subsidies are removed there will be an increase in the retail price index?

Mrs. Shirley William

Of course, my hon. Friend is right. He will appreciate that the TUC and the trade unions have come a long way in supporting a flat-rate limit on their increases. It would be impossible for them to do so unless the Government also demonstrated concern for the situation of the least well-paid and the least well-off.

Mr. MacGregor

Is the right hon. Lady aware that there is strong feeling among moderate and responsible people that it is wrong to increase food subsidies any further at present? Quite apart from the need to cut public expenditure, does the right hon. Lady agree that food subsidies are a bad way of helping those who are at the lower end of the income scale? Will she confirm that the Press reports from Brussels this morning that the Government are contemplating a further increase in food subsidies to compensate for the effect on the retail price index of a revaluation of the green pound are incorrect?

Mrs. Shirley Williams

The hon. Gentleman will find that there are other Questions on the Order Paper on this point, but on the general question of subsidies I must go back to the past. I would not wish to do so but I think that it is necessary on this occasion. The hon. Gentleman's administration permitted large subsidies to be made available to nationalised industry prices—subsidies very much less progressive than the subsidies on food that this Government have introduced.

Mr. Raphael Tuck

Will my right hon. Friend explain to the Opposition that as producers are also consumers, wage demands are bound to be influenced by the level of prices, and that to keep subsidies on is the only way of combating inflation?

Mrs. Shirley Williams

I accept what my hon. Friend said. In a situation where unquestionably those with average or higher than average standards of living will have to be asked to make sacrifices, it seems to the Government only reasonable that those who are considerably below the average standard of living should be helped in one way or another.

Sir John Hall

Does the right hon. Lady agree that, despite the measures proposed in the White Paper that we shall be debating this afternoon, unless the Government are prepared to add further to the £70 million additional food subsidies, as proposed in the White Paper, the cost of living at the end of this year is likely to be over 30 per cent. higher?

Mrs. Shirley Williams

I hope that the hon. Gentleman will be proved wrong. The best estimates that I can make suggest that he will be proved wrong. I have to repeat that there have been rumours and discussion about the possibility of a further oil price increase, to take one example. None of us can predict exactly what may happen to commodity prices. Present trends show commodity prices continuing to fall.

Mrs. Sally Oppenheim

As the annual rate of increase in the retail price index is now more or less double the rate that the right hon. Lady inherited from the previous Conservative Government, will she acknowledge that the present rate signals the total failure of her Government's policies, and will inevitably lead not to a three-day working week but to a nil-day working week for more than I million people this winter?

Mrs. Shirley Williams

No, the hon. Lady is not right. I have the year-on-year percentage changes in the RPI—20.1 per cent. and 26.1 per cent.—in front of me, and it is untrue to suggest that the rate at present is double the rate that applied when the hon. Lady's administration left office. I would say, in addition, that we would welcome the support of the hon. Lady for the policies that we propose to take to offset inflation.


Mrs. Shirley Williams

On a point of order, Mr. Speaker. I wish to make an apology. I misheard a remark which the hon. Member for Gloucester (Mrs. Oppenheim) threw at me across the Table in what was, I think she will agree, a somewhat rowdy moment. I thought that she was speaking about food prices in the figures she mentioned. I am told that she was referring to the all-items index, and I apologise. This matter can be raised in the forthcoming debate.

30. Mr. H. Boardman

asked the Secretary of State for Prices and Consumer Protection what was the percentage increase in the index of retail prices in the period March 1974 to May 1975; and what were the increases for the same period for food, electricity, gas, coal, postal charges, telephone charges, and public transport.

Mrs. Shirley Williams

I shall arrange for the figures to be circulated in the Official Report.

Mr. Boardman

Is it not obvious that some of the greatest inflationary pressures have come from the town halls and the State industries? Does my right hon. Friend agree that unless the Department can effectively control these elements there is little or no hope of success in other departments?

Mrs. Shirley Williams

My hon. Friend will know that the price increases in certain nationalised industries have, above all, reflected the massive increase in firsthand fuel prices, particularly in that of oil. Therefore, there have recently been attempts to prefer the small consumer in terms of tariff changes. We on this side very much welcome that.

Mr. Mike Thomas

But is it not a fact that the changes in electricity and gas tariffs have been modest in the extreme and that the breadth of the increases in those and other charges, particularly in the nationalised industries, are about to submerge the consumer completely, and that the White Paper offers no precise way of ameliorating the problem for them?

Mrs. Shirley Williams

I assure my hon. Friend that on the best forecast we have the indications are that nationalised industries' prices are not likely to increase in the coming year at anything like the rate of the present year, which was largely due to the massive increase in first-hand fuel prices.

The information is as follows: The percentage increases for the retail price index and selected items over the period March 1974 to May 1975 were:
All items 31.1
Food 30.1
Electricity 60.5
Gas 13.9
Coal 40.8
Postal charges 79.2
Telephone charges 38?9
Rail fares 29.9
Bus etc. fares 36.5