HC Deb 14 October 1976 vol 917 cc613-4
7. Mr. Watkinson

asked the Chancellor of the Exchequer if he is satisfied with the present level of investment in industry.

Mr. Joel Barnett

The latest Department of Industry investment intentions survey suggests that industrial investment decisions being taken now will lead to a more satisfactory level of investment than we have been seeing for the past year or so.

Mr. Watkinson

Is my right hon. Friend aware that the recent increase in interest rates will have a significant effect on the level of investment in the next year? Can he say how long he expects these interest rates to remain at their present level? Would he be prepared to undertake a specific direction to the banking sector in respect of the nature of its advances in order to ensure that wherever advances are made they go specifically to investment?

Mr. Barnett

I can tell my hon. Friend that interest rates at their present level will stay as they are until the money supply is on target with what the Chancellor suggested in his statement of 22nd July. In respect of a direction to the banks that has already been done and I am sure that the banks will see to it that the maximum amount of resources goes to manufacturing industry.

Mr. Bulmer

Will the right hon. Gentleman tell the House by how much the minimum lending rate now exceeds the average return on capital of British industry?

Mr. Barnett

I am sure the hon. Gentleman appreciates that that is an impossible question. [HON. MEMBERS: "Why?"] Because the interest charged is in most cases a comparatively small part of the unit costs. Opposition Members who are muttering in their seats must appreciate that the great bulk of new investment in manufacturing industry comes from ploughed-back profits and that the present Government and Chancellor have done more for manufacturing industry in this country than has been done by any other Government since the war.

Mr. MacFarquhar

While appreciating what the Chancellor said on Monday about the source from which firms get much of their investment capital may I ask my right hon. Friend to say how long he thinks we can keep the minimum lending rate up at its present level before investment intentions for the future will definitely be affected?

Mr. Barnett

I certainly share my hon. Friend's hope that we will be able to get the minimum lending rate down as soon as possible, but it is not possible to say when just now.