HC Deb 15 July 1976 vol 915 cc891-2
13. Mr. Teddy Taylor

asked the Chancellor of the Exchequer if he will make a statement on his policy on interest rates.

Mr. Robert Sheldon

The Government's policy is to keep interest rates at as low a level as is compatible with the external position and the need to finance the public sector borrowing requirement.

Mr. Taylor

Does the Minister think that mortgage rates are likely to go up? If he does not know the answer, will he say whether it is Government policy to seek to avoid their going up?

Mr. Sheldon

It is the Government's policy to keep interest rates as low as possible consistent with the twin objectives of attracting money to pay for the borrowing incurred overseas as a result of our overseas deficit and also to retain as low a rate as possible for the expansion of industry.

Mr. Watkinson

Does my hon. Friend accept that it is now time to give serious consideration to a two-tier system of interest rates so that the expansion of industry at home is not hindered by the need to attract funds from abroad at high interest rates?

Mr. Sheldon

My hon. Friend will know that I and many others are much attracted to a scheme of two-tier interest rates. The difficulty is that with the sophisticated markets that operate in this country there would be bound to be considerable leakage from one tier to the other. That would make such a policy unworkable.

Mr. Wigley

Does the Minister foresee that in the next decade interest rates will fall to the level that was common in the 1950s and 1960s? If so, what steps does he believe need to be taken to attain that objective?

Mr. Sheldon

I find the forecasting of interest rates one of the hardest problems before me. As for estimates into the next decade, I am sorry that I am unable to help the hon. Gentleman.

Mr. Nott

Is the Minister aware that the interest rate differential between London and New York is now 5 per cent.? He said that the Chancellor was keeping interest rates as low as possible compatible with the need to attract foreign funds. A difference of as much as 5 per cent. is surely high. Given the Financial Secretary's answer, why is it necessary?

Mr. Sheldon

The day-to-day management of these matters takes into account the demand and supply of funds generally. This is the estimate at present. These matters vary, and they will vary in the coming months.