HC Deb 05 March 1979 vol 963 cc896-7
21. Mr. Gow

asked the Secretary of State for Prices and Consumer Protection what recent representations he has received about the increase in minimum lending rate to 14 per cent.; and what effect he expects that increase to have on the index of retail prices.

Mr. Hattersley

None, in both cases.

Mr. Gow

Does not the Secretary of State agree that the very high level of the Government's borrowing is the principal factor in the very high interest rates? Does he not understand that very high interest rates are wholly hostile to any growth in the economy?

Mr. Hattersley

No, the very high interest rates, which I regret as much as the hon. Gentleman, are the result of a combination of factors, some of which are international and some of which are domestic. Having put down his question the moment that MLR went up, I would have hoped that the hon. Gentleman would record his pleasure that it has now gone down again.

Mr. Litterick

Has my right hon. Friend considered referring to the Price Commission the rate of interest offered on the recent issue of Government securities?

Mr. Hartersley


Mr. Nicholas Winterton

Does the Secretary of State accept that high interest rates have a bearing on prices charged by smaller business, the retailer in particular? Therefore, does not he accept that part of the price increases which housewives are experiencing today are a result of the Government's very high public service borrowing requirement, which in the past has driven up interest rates and MLR? However, I welcome the recent small reduction in MLR.

Mr. Hattersley

Of course increases in lending rates and the cost of borrowing are contributory factors when price increases come about. But the point that I tried to make a moment ago is that we must try to keep a balance over the economy as a whole. We have kept the public sector borrowing requirement firmly in check, we have stuck to our targets with regard to PSBR and our interest rate policy is a contributory factor in those targets being maintained.

Mr. Michael Latham

With regard to local authority borrowing, will the right hon. Gentleman blame the shattering increase in rates which will come next month in many areas of the country—which will be far in excess of the Government's targets—on Lord Barber or on the EEC common agricultural policy?

Mr. Hattersley

Different authorities have different records with regard to rate increases, and different authorties have different—

Mrs. Oppenheim

Labour authorities.

Mr. Hattersley

The hon. Lady cries "Labour authorities". That enables me to make my second point, which is that different authorities also have different records on the provision of services. The cry of "Labour authorities" is appropriate to them as well. As to specific rate increases, the hon. Gentleman must ask the Secretary of State for the Environment, and not me.