HC Deb 22 November 1960 vol 630 cc969-70
35. Mr. Osborne

asked the Chancellor of the Exchequer, in view of the fact that the Bank Rate in Belgium and Germany is 4 per cent., in France and the Netherlands 3½ per cent., and in the United States of America only 3 per cent., what are the reasons for maintaining the United Kingdom Bank Rate at 5½ per cent.; and if he will make a statement.

Mr. Selwyn Lloyd

In considering movements in the level of Bank Rate I have to bear in mind its effect on the strength of sterling abroad and the state of the economy at home. There are thus many factors to be considered apart from the level of similar rates in other countries; it was after taking all these into account that I approved a reduction in Bank Rate from 6 per cent. to 5½ per cent., on 27th October last.

Mr. Osborne

Would not my right hon. and learned Friend agree that this "hot" money that comes in as the result of a nigh Bank Rate is tending to build up a short-term liability which may exceed our immediately realisable international assets, and is not that of great danger to us? Secondly, why should we pay high rates of interest to what is international "funk" money, which can only be dangerous for us in a real emergency?

Mr. Lloyd

I have to consider the question of the strength of sterling, and I think it is of paramount interest to this country that sterling should remain strong. I am aware that a certain proportion of this money is what is called "hot" money. I think also that there is considerable investment, showing a high confidence in the strength of sterling and our future prospects.

Mr. Jay

Can the Chancellor say why this country alone should have this very high interest rate, which Mr. Cobbold, Governor of the Bank of England, described as a "crisis rate"?

Mr. Lloyd

We have discussed these matters, and I have set out the considerations, which are not solely those concerned with foreign rates, and I approved a reduction, from 6 per cent. to 5½ per cent., on 27th October.