§ 9. Mr. John Fraserasked the Chancellor of the Exchequer whether he will set up an inquiry into ways of insulating domestic interest rates from fluctuations in international interest rates.
§ Mr. Roy JenkinsNo, Sir.
§ Mr. FraserWould my right hon. Friend agree that rises in interest rates mean that the rich get richer and the poor get poorer and that most people who lend money at interest in this country have no intention of lending it ouside the country? It seems insane to them that changes in interest rates in New York should affect building society rates in this country. Will he look into the matter?
§ Mr. JenkinsI think that the relationship between interest rates and the distribution of income is probably somewhat more complex than my hon. Friend suggests, but I do not think that it would be possible to insulate ourselves from interest rates outside in the way he suggests.
§ 11. Mr. Barnettasked the Chancellor of the Exchequer if he will make a statement on the current level of interest rates.
§ Mr. Roy JenkinsThe current level of interest rates in this country reflects the requirements of domestic economic and monetary policy as well as levels in financial centres overseas.
§ Mr. BarnettIs not the present level of interest rates alarming, particularly in view of the serious effect on investment decisions? Does not that stem from the United States monetary policy? Can my right hon. Friend say what discussions he is proposing to have with the United States with a view to seeing whether action can be taken to reduce the international level of interest rates?
§ Mr. JenkinsI keep in fairly close touch with the United States on these matters, as I do with other monetary authorities. I am not entirely convinced. This is a factor which could have an effect on investment decisions, but the fact -remains that with interest rates at what I think is a historically high level at present, investment plans are also at a very high level.
§ Mr. Patrick JenkinNow that the Chancellor has gone on record as saying that the increase in interest rates is in part due to deliberate Government policy, will he take responsibility for the £2½ million extra which the G.L.C. is having to find, on account of which it has put up its rates today?
§ Mr. JenkinsNo, Sir. For one thing, when local authorities borrow it is the case that they get substantial help from the Government in terms of interest rates. I also indicated that while probably the dominant factor is the level of international interest rates, two reasons why I cannot ignore this are the basic facts of the situation and that I believe it right to pursue a policy of credit stringency in this country.
§ Mr. Iain MacleodIf the dominant factor is the international interest rates, how was it that in 1964 both the Leader and Deputy Leader of the Labour Party pretended that unilaterally they could bring down rates in this country?
§ Mr. JenkinsNo. I think that they indicated that they could introduce something very near to the option mortgage scheme.
§ Mr. AlbuIn view of my right hon. Friend's estimates of investment and exports, are there indications that by the end of the year there will be spare capacity in the capital goods industries?
§ Mr. JenkinsIt does not look as if there will be anything like approaching spare capacity in the capital goods industries. The indications are both that export orders are strong in this sector and that, with a fairly strong home investment demand, demand is stronger, as I would wish, in the capital goods sector than it is in the consumer goods sector.