HC Deb 02 May 1974 vol 872 cc1303-4
10. Mr. Biffen

asked the chancellor of the Exchequer what proposals he has to lower interest rates.

Mr. Healey

It is the Government's aim to reduce interest rates from the high levels which we inherited as soon and as far as domestic and external conditions make this feasible. Short-term rates have already fallen as a result of the action we took to release special deposits last month.

Mr. Biffen

In view of the recent and sharp increases in the prime rate of the United States, does the right hon. Gentleman feel that there is much prospect of lowering domestic interest rates without having a consequential effect on the sterling exchange rate?

Mr. Healey

This is a matter that causes all observers some concern. The recent increase in American rates was unexpected by the American banking community as recently as a month or two ago. If external rates continue to decline, limits will be set on the ability of British rates to fall. I hope that Conservative Members will applaud the attempts that we have taken, so far successfully, within the existing context to reduce British interest rates.

Mr. Cant

Apart from the problems mentioned by the hon. Member for Oswestry (Mr. Biffen), is not my right hon. Friend putting himself on the horns of a dilemma? By persuading the Bank of England to release special deposits to buy Treasury bills and local authority bills, is he not going for something of an overkill, in the sense of trying to reduce the rate of interest? As a confirmed monetarist, is he mindful of the fact that the more he increases the money supply in this country the more he is likely to undermine his attempt to reduce the rate of interest?

Mr. Healey

First, I must inform my hon. Friend that I am neither a confirmed nor an unconfirmed monetarist. However, I believe that the volume of money supply has an influence on many factors in the economy. I am afraid that all Chancellors in all Parties and in all countries live permanently on the horns of a dilemma.

Mr. Bruce-Gardyne

Will the right hon. Gentleman revert to the practice of the previous administration and reveal the rate of interest to be charged on loans raised in the Eurodollar market by local authorities and statutory corporations? Is not it a fact that the latest borrowing operation by the Glasgow city authority attracted a premium over the inter-bank rate and considerably in excess of the rates applying to loans raised under the previous administration? Does not that fly in the face of the evidence that the right hon. Gentleman the Chancellor of the Duchy of Lancaster gave to the House in the Budget debate?

Mr. Healey

I understand that my right hon. Friend the Paymaster-General has already written to the hon. Gentleman on the point that he has in mind. The hon. Gentleman will be aware that Governments are not at liberty to reveal the rates of interest charged when the borrower does not wish the rate to be revealed. That was the position in respect of the Glasgow loan to which the hon. Gentleman was referring.