HC Deb 27 June 1961 vol 643 cc174-6
3. Sir C. Osborne

asked the Chancellor of the Exchequer, in view of the fact that most of the hot money attracted to London has now been repatriated and of the harm that high money rates are doing to house building and trade generally, if he will now recommend a 1 per cent. Bank Rate reduction in order to give additional encouragement to industry; and if he will make a statement.

The Economic Secretary to the Treasury (Mr. Anthony Barber)

I am sure that my hon. Friend knows that, even if I agreed with his analysis, I should not make a statement about future Bank Rate policy.

Sir C. Osborne

Is my hon. Friend aware that I am glad that he agrees with my analysis of the situation? If he cannot promise not to reduce the Bank Rate, will he use his influence to ensure that we are not so stupid as to increase it, because increasing the Bank Rate increases our costs at home and hot money is no good to us at all? Will he see that these ideas are put before his right hon. and learned Friend?

Mr. Barber

I regret that I cannot agree with my hon. Friend in the analysis which forms the basis of his question. As to the second part of his supplementary question, all these are matters which are taken into account in considering the level of the Bank Rate.

Mr. H. Wilson

Is the Economic Secretary aware that, apart from the other damaging effects which were mentioned at Question Time last week, a large number of owner-occupiers, including myself, received a communication this morning from building societies saying that the rate of interest charged on building mortgages is now going up, this figure having been reduced three weeks before the last election? In view of this, will the Economic Secretary consider the necessity of making a fundamental change in our interest rate policy?

Mr. Barber

As I think the right hon. Gentleman knows, building societies' lending and borrowing rates are not geared to the Bank Rate and a reduction of 1 per cent. in the Bank Rate, as suggested by my hon. Friend, would probably not lead to any reduction in building society rates. The right hon. Gentleman will agree that building society rates move more in line with longer-term yields than with the Bank Rate or with money market rates.

Sir C. Osborne

Since high Bank Rates merely attract hot money, which disguises our real economic position and makes our people live in a fool's paradise, why do we not get cheaper money here so that our people can understand our real difficulties?

Mr. Barber

When dealing with the matter in the course of the Budget debate my right hon. and learned Friend frankly admitted that the level of the Bank Rate has to be determined in the light of both our internal and our external require- ments and that these sometimes conflict. All these matters are taken into account when the level of the Bank Rate is considered.