Below is the text of Mr Major’s response on Inflation (Europe) made on 5th July 1990 in the House of Commons.
Mr. Loyden To ask the Chancellor of the Exchequer how many European countries currently have a higher inflation rate than the United Kingdom.
Mr. Major Two, Sir.
Mr. Loyden The Chancellor of the Exchequer and the Prime Minister constantly make claims about the health of Britain’s economy, but Britain has the worst inflation rate of the seven most industrially advanced countries. Is not that a disgrace?
Mr. Major The hon. Gentleman is correct. The rate of inflation is a good deal higher than I would wish it to be, or than it will be in due course. As the hon. Gentleman clearly shares my view, I am surprised that he supports Opposition policies that would raise inflation and keep it high for a very long time.
Mr. Higgins Is my right hon. Friend aware that we may be giving the impression that our currency is declining in value faster than that of other countries because of the appallingly poor quality of the paper used for the new £5 note? Will he ensure that paper of the proper quality is used and that he does not harmonise in that respect with the other European countries, whose currency notes have always been of far poorer quality than ours?
Mr. Major My right hon. Friend makes an important point that will be echoed in many quarters.
Mr. John Smith Does the Chancellor reflect that it is a poor comment on 11 years of Conservative Government that we have the worst rate of inflation of all the G7 countries, and that nine of the European Community countries have a better inflation record than ours? After 11 years in government, is not that a pitiful record?
Mr. Major The right hon. and learned Gentleman is being typically selective. He has overlooked the greatest growth in investment and productivity and the greatest underlying improvement in the economy over that 10-year period compared with any other nation in Europe.
Mr. Beith Now that the Chancellor has had an opportunity to discuss with the president of the Bundesbank the working of the anti-inflationary policy, why does he still believe that an autonomous central bank, with responsibility to maintain price stability, has no place in Britain and can be no part of European monetary union?
Mr. Major For precisely the same reasons as I have explained to the hon. Gentleman.
Mr. Ian Stewart With the approach of 1992 and the greater harmonisation of many activities in Britain and the other member states of the European Community, will my right hon. Friend give serious and urgent consideration to introducing a more reasonable and equivalent measure of inflation than the retail prices index, which is quite unlike the measure used in other European countries? The inclusion of mortgage interest rates greatly exaggerates the supposed rate of inflation, although interest rates are raised to reduce inflation. Does my right hon. Friend accept that the sooner that change is made the better, particularly so that comparisons with other Community countries can be more realistically understood outside the House?
Mr. Major My right hon. Friend is entirely correct that, on a more comparable basis that takes account of the differing factors in the relative inflation measures, the more correct rate of inflation in the United Kingdom is about 7 per cent., compared with a European Community average of about 5 per cent. He made an important point.