Interest Rates (Hansard, 24 January 1980)

§ 13. Mr. Cryer
asked the Chancellor of the Exchequer what representations he has received regarding the level of interest rates.

§ Mr. Lawson
I have in recent months received a number of representations on the current level of interest rates, in particular from business men and home owners.

§ Mr. Cryer
Is it not true that the high interest rates prevailing under the Tory Government—and the intention to raise them was not included in the Tories' election manifesto—are causing grievous difficulty both to home owners and to small businesses, and are resulting in an increase in charges across the board? Is this not one of the most inflationary measures undertaken by the Government? When do they intend to reduce interest rates to help home owners, small busi- 636 nesses and local authorities, all of whom are paying through the nose as a result of the Government's actions?

§ Mr. Lawson
The reason why interest rates are so high is twofold. First, we inherited a money supply that was wholly out of control. We had to take measures to bring it back into control. I hope that the hon. Member for Keighley (Mr. Cryer) will support us in that. The second reason is that we have inherited a public sector borrowing requirement that is far too high. Despite the reduction we made, it remains too high. That is why we are determined to get the PSBR down, and I hope that the hon. Member will support the Government in that because of his concern for small firms, which are having to bear the high interest rates.

§ Mr. Peter Bottomley
Is the Minister satisfied that the retail price index deals adequately with the consequences of the rise in mortgage interest rates when there are four building society investors receiving a higher income for every building society borrower who is paying a higher mortgage rate?

§ Mr. Lawson
Whether the RPI as at present constituted deals adequately with mortgage rates is a nice question. However, it is a matter for the RPI advisory committee. It is not for the Government to interfere with the constitution of the RPI.

§ Mr. Healey
Does not the Minister accept that the building societies have said that, even if the Government now bring the minimum lending rate down, they will need to retain the mortgage lending rate at its present level? Is it not a fact that that level has been primarily determined bythe increase in inflation generated by the Government's actions?

§ Mr. Lawson
That is not so.
I gave the reason for the increase in interest rates to the hon. Member for Keighley (Mr. Cryer). It is our hope that interest rates can be brought down as soon as it is safe, consistent with monetary growth. Mortgage interest rates will, in the long run, follow the course of interest rates generally.

§ Mr. Stephen Ross
Will the Minister say whether his Department has made 637 any representations to the clearing banks, which are not satisfied with taking 21 per cent. from small businesmen, such as myself, but are also putting up their charges generally? Is he aware that the charge for each cheque presented is now 17½p.? Surely this is unnecessary.

§ Mr. Lawson
I am sure that the hon. Gentleman is not suggesting that the Government should interfere with the level of bank charges, or with the level of every price or charge levied by any institution. If he wants that degree of detailed interference, he is betraying the honourable name of Liberalism.