Oral question asked in the House of Commons, by Brian H Donohoe (Labour). It was answered on Thursday, 11 May 2006 on behalf of the Treasury.

Inflation Target

Question: How has it been possible to maintain such low inflation, which has been very helpful to local industries in my constituency, while energy prices, particularly oil, have soared in price? What is the Chancellor going to do about that?

Answer: It is sad that, as a result of the doubling of oil prices, we have seen domestic gas and electricity prices and the cost of energy for industry rising. In other decades in which oil prices doubled—in fact, over a period of years, it has trebled—the British economy would have been forced into recession as a result of excessively high inflation. Most people realise that when America, the euro area, Japan and even China are putting up interest rates, Britain has by comparison managed to keep both low inflation and higher growth in the economy. That is the result of the macro-economic framework that has enabled us to deal with difficulties, one of the greatest of which is high energy prices, as they arise. We will continue to pursue a policy of low inflation and higher growth.

Secondary information