Mr. H. Wilson
(by Private Notice) asked the Chancellor of the Exchequer if he will make a statement on the increase in Bank Rate which was made with his authority on Thursday, 21st January.
The Chancellor of the Exchequer (Mr. Derick Heathcoat Amory)
The economy has been expanding rapidly since the middle of last year. This is a welcome development which has accorded with the needs of the situation. But in recent weeks there have been a number of indications that some strains may he developing. It is important to avoid the emergence of renewed inflationary pressures, and particularly any weakening of the present healthy condition of the balance of payments. Last Thursday's move was intended, in the light of both external and internal circumstances, as a moderating factor against such a development.
As the Treasury statement last Thursday particularly stressed the internal factors, does this mean that the Chancellor now, almost three months after the election, thinks we are having it too good? Will he not accept the view of, I think, a very large number of people, not necessarily just those on this side of the House, that since we have at last, after all these years, just begun to get an improvement in investment in manufacturing industry, and a recovery from the cuts imposed by the right hon. Gentleman the Member for Monmouth (Mr. Thorneycroft), it is most regrettable that he should choose that very moment to put the brake on?
No. I cannot agree with the right hon. Gentleman. If there is any 34 danger of the internal economy getting out of balance it is due to a slight feeling of exuberance as a result of the enhanced confidence in the country's prospects as a result of the General Election.
The changing prospects of industrial investment is, of course, one factor, but only one factor. We have to remember all investment, and the prospects are that total investment, public investment, private industrial investment, and private investment as well as industrial investment taken together, are going to show a very substantial increase.
Yes, but the right hon. Gentleman told us that this exuberance to which he refers has been characterised partly by a big increase in consumption, and that we cannot now afford the increase in investment we have all been calling for. But is he aware that it is widely considered that one reason for this action last week—indeed, it was so stated—was the degree of speculation in the City which has followed the election? Is it not a tragedy that industrial investment should have been held back because the Government could not do anything to prevent excessive speculation?
It is a question of keeping all these things in balance. This move is not due to any one factor, but in consideration of all the factors involved, and the consideration of all the factors involved pointed to the wisdom of this step of slight moderation. I am quite sure that it will prove to be a timely step.
§ Mr. C. Osborne
Is my right hon. Friend aware that the vast majority of the people will welcome this further step as a check to inflation which may be developing, because what they want above all is stable prices? If this is what it will achieve, they will be glad this step has been taken.
I entirely agree with what my hon. Friend has said. This country has enjoyed a high level of activity, taken as a whole, with stability of prices for eighteen months. That is something very precious and well worth preserving.
§ Mr. Chetwynd
Does the right hon. Gentleman anticipate that this increase in Bank Rate will affect the amount of capital investment supposed to take place in the Development Areas?
§ Mr. Mellish
Is there anything the Chancellor can do to make certain that the interest charges on the purchase of houses will certainly not go up? Is he aware that today the prices of houses are probably greater than they have ever been in the history of the country and that hundreds of thousands of people wanting to buy their houses cannot do so because of the present policies of the Government? Can he do something about that?
The policy of the Government is to do everything we can to maintain stable prices. That is the important point. The whole object of this kind of exercise, of keeping the balance in good time, is to ensure that we continue to enjoy stability of prices.
§ Mr. J. Hynd
Does the right hon. Gentleman believe that, apart from costing the local authorities more for borrowing and making it more difficult for people to buy houses, this will have any appreciable effect whatever in checking inflation? If so, will he tell us what is the purpose of the Radcliffe Report?
I do not think that there is any conflict with the recommendations of the Radcliffe Committee. The prospects for housing, taking it as a whole, look to me to be extremely favourable at present. It looks as though the total number of houses under construction is likely to show a continuing increase.
§ Mr. Roy Jenkins
Is this not a striking indication of the way in which the Government, during the last few years, have allowed the balance of employment in different parts of the country to get out of hand, so that they should feel it necessary to take anti-inflationary measures while so many parts of the country are so far short of full employment?
I think that if we waited till the pressure on the economy became such that there was absolutely full employment everywhere in the country, the anti-inflationary steps which would have to be taken then would be far more extreme and would militate against precisely the object of securing expansion of employment in those areas to which the hon. Gentleman refers.