Oil Prices

Lord Hughes of Woodside Excerpts

Wednesday 8th June 2011 Lords Chamber

[Lord Sassoon]

Well, I am always reluctant to disagree with the analysis of my noble friend who has considered these matters for many years, but I do disagree because I think that the medium-term target that the Bank of England has been given and the framework within which the MPC operates continue to be entirely appropriate. Of course, it is a medium-term target, and the latest Office for Budget Responsibility forecast from March shows inflation coming down to 2.5 per cent in 2012 and 2 per cent in 2013.The comparison of independent forecasters shows a very similar picture—2.3 per cent next year and 2.1 per cent in 2013. This shows that the Bank of England has the confidence of the commentators and the forecasters to continue to work to its mandate successfully.

[Lord Hughes of Woodside]

Is it not the case that inflation is never going to reach the benign figures that the Minister says? Yesterday we were warned of a gas price increase of 19 per cent, an electricity price increase of 10 per cent, and all the other companies will do the same. How can the noble Lord possibly think that inflation is under control? Is he simply going to let the spiral continue until we land in bankruptcy?

[Lord Sassoon]

My Lords, of course we would not wish to see inflation at the 4.5 per cent it is now. As has been explained, this is very largely driven by global factors with regard to commodity prices. We are not only keeping to our tight fiscal policy, which underpins the ability of the Bank of England to stick to its mandate, but giving help to the most vulnerable—whether that is the Budget announcement that gave a £630 increase in cash in personal allowances for the under-65s, whether it is in the arrangements that we made to cut fuel duty effectively by 6p per litre from what the plans of the previous Government had been, or whether it is increasing the state pension by 4.6 per cent. What the Government must do, and are doing, is to protect the most vulnerable in our society.