HC Deb 24 May 1973 vol 857 cc646-7
8. Mr. Dalyell

asked the Chancellor of the Exchequer what action he is taking to contain the level of interest rates.

Mr. Patrick Jenkin

By safeguarding faster growth and by lowering inflationary expectations.

Mr. Dalyell

In this context, what is the Treasury's attitude to the management of the money supply?

Mr. Jenkin

My right hon. Friend the Chancellor has frequently stated the Treasury's attitude to the money supply. We regard the containment of the growth of the money supply as an essential arm of economic policy.

Mr. Ridley

Does not my hon. Friend agree that the Bank has been preventing interest rates from falling by its policy with the discount houses? It is a policy with which I entirely agree, but it is not the answer my hon. Friend gave to the hon. Gentleman.

Mr. Jerkin

I do not accept my hon. Friend's proposition. He will have noted that on 18th May the minimum lending rate fell to 7¾ per cent. Moreover, the Bank's deposit rate has fallen to 6,¾ per cent., and the base rate to 8½ per cent. I should have thought that those were encouraging moves in the direction that my hon. Friend would like to see.

Mr. Healey

Does the hon. Gentleman agree that the major factor in producing the rise in interest rates, which falls so cruelly on young couples wanting to buy a house, is the Government's decision to finance their expenditure by borrowing rather than raising taxation and the policy of competition and credit control in the banking system?

Mr. Jenkin

We know that the right hon. Gentleman's policy is always to increase taxes. It is this Government's policy to cut taxation. It is not the size of the borrowing requirement that determines the level of interest rates; it is the manner in which the money is raised. My right hon. Friend has made abundantly clear that he intends to raise the great bulk of the money from non-bank sources.