§ 19. Mr. Hooley
asked the Chancellor of the Exchequer what international discussions, to which the United Kingdom Government are a party, are in progress 581 designed to reduce the general level of interest rates.
§ Mr. Hooley
That reduction is welcome, but if it is impossible to make progress on international agreements in this field will my right hon. Friend examine the possibility of having two-tier interest rates internally so that we can have preferential rates of interest for social and industrial investment?
§ Mr. Dell
This matter has been discussed with my hon. Friend before. It would be difficult to insulate by effective barriers the two tiers which my hon. Friend recommends. I am sure he will welcome the success of the Government in producing some reduction in interest rates over the past few months.
§ Mr. Norman Lamont
Does the Paymaster-General recall the statement of the Chancellor of the Exchequer in his March Budget that the most important thing for reducing domestic interest rates was to reduce the domestic borrowing requirement? Does the right hon. Gentleman think that an increase in the borrowing requirement will help to reduce interest rates?
§ Mr. Cant
I appreciate that the increase in the borrowing requirement has, unfortunately, forced up yields in the gilt- 582 edged market, but does not my right hon. Friend think that we are being a little too cautious when interest rates are declining in Europe and the United States'? Does he not have sufficient confidence in the banking system of this country to offer the sort of attraction that is required to the Arabs in relation to their oil money? Does he not think that he could reduce interest rates in this country and still keep Arab oil money here?
§ Mr. Dell
The relationship between domestic interest rates and Eurodollar interest rates has changed over the past few years, and there is now a differential in favour of sterling. This is a matter that we watch, but we have to bear in mind the relationship between domestic and international rates.