HC Deb 24 July 1980 vol 989 cc747-8

3. Mr. Sever asked the Chancellor of the Exchequer what further measures he is taking to lower the minimum lending rate.

The Chief Secretary to the Treasury (Mr. John Biffen)

The Government's public spending, taxing and borrowing policies are designed to make it possible for monetary targets to be achieved with lower nominal interest rates in due course.

Mr. Sever

Does the Minister accept that, particularly in the inner areas—such as Ladywood—of big cities, one of the best opportunities available to the Government for stimulating employment and maximising profit is the stimulation of the small business sector? Does he further agree that the stimulus they are looking for includes an immediate reduction of the minimum lending requirement?

Mr. Biffen

I accept that the level of interest rates has a very real bearing on the general climate of business optimism and that it is wholly desirable that the Government should have as an objective the achievement of lower interest rates, provided that they are consistent with the monetary aggregates.

Mr. Budgen

Will my right hon. Friend please explain why the effect upon the money supply of taking off the corset should be disregarded, as is suggested in the Financial Times today?

Mr. Biffen

I bear many burdens, but what appears in the Financial Times is not one of them.

Mr. Richard Wainwright

In this connection, will Treasury Ministers at least consider reducing the return net of tax to foreign lenders, as other countries have done, with a view to reducing the inflows into this country which are helping to achieve a gross overvaluation of sterling?

Mr. Biffen

That is a highly contentious suggestion and I do not think that I can give any answer to it this afternoon.

Mr. Healey

Is the right hon. Gentleman aware that for once we congratulate him on cutting the minimum lending rate last month, although the subsequent money supply figures showed that the money supply was running outside the Government's target? Is he aware that we shall also congratulate him if he cuts minimum lending rate again in September, in spite of the fact that the unwinding of the corset is likely—according to the Governor of the Bank of England on Monday—to add perhaps over 3 per cent. to the monetary range?

Mr. Biffen

The congratulations of the right hon. Gentleman will always be assessed in the circumstances in which they are proffered.

Mr. Bruce-Gardyne

Does my right hon. Friend agree that every Minister, without exception, in every spending Department could well have emblazoned on his wall the motto "Spending less means borrowing less; and borrowing less means lower interest rates for the benefit of the private sector"?

Mr. Biffen