The annual conference of the technical and It was unwise of Heath to claim only a few days before the publication of the April pric figures that Britain had the lowest rate ol inflation in Europe, Last month retall prices rose by 1.9 per cent (equivalent to about 25 per cent a year) - an almost Latin American rate which if it continued would mean that by 1980 beer would cost over El a pint! In any case, even before April, Heath was wrong. Over the year up to March 1973, Britain had the highest rate of inflation in Europe, with the exception of Ireland. Over the most recent chree months Italy, Germany, and Belgium have all caught up a little, though the British rate is still well above the average The experience of all the capitalist countries is, however, increasingly uniform: all of them are experiencing a rate of inflation between 6 and 10 per cent a yeur.
The April figures are freakish since they include a number of non-recurrent factors. Of the 1.9 per cent increase, VAT accounted for 0.7 per cent, the annual increase in local authority rates 0.5 per cent, seasonal price rises 0.3 per cent, and the rest 0.4 per cent. But the recurring factors are now being joined by the flood of increases authorised by the Prices Commission in its great defrost after the so-called treeze.
WAGES AND PRICES During Phase I it was, of course, wages and not prices which were in the ice-box. They rose less than 1 por cent, while prices shot up by 4 per cent. The Beonomics Editor of the Financial Times disingenuously remarked that "success of the anti-inflation policies so fur has been much more apparent on the wages side.' But that was the whole idea, In fact, the pay laws are more a pro-inflation than an anti-inflation policy. More precisely, they are designed to keep the growth of wages well behind the combined growth of productivity and prices, and therefore to raise profits, They have succeeded less than expected because some of the gains of slower growing wages have been eaten into by faster growing prices of raw materials. In Phase I, with wages rising a little and raw material peleen continuing to soar, capitalists will still be forced to maintain the highest rate of inflation which (beir inter. national competitive position allows, This shows that the attempt to find an original cause of inflation is as vain as the search for the end of the rainbow. Some economists, of course, say that it really is a pot of gold — in other words the supply of money. But money does not cause inflation; it has the more passive role of feeding it.
DISTRIBUTION Inflation is not an automatic response either to wage Increases or to the money supply. It is