HC Deb 26 June 1980 vol 987 cc735-6
15. Mr. Ioan Evans

asked the Chancellor of the Exchequer what is the latest rate of minimum lending rate; and what is the equivalent rate in the Federal Republic of Germany and Austria.

Mr. Lawson

Minimum lending rate is currently at 17 per cent. The central bank discount rate, which is the equivalent of MLR, is 7½ per cent. in the Federal Republic of Germany and 6¾ per cent. in Austria.

Mr. Evans

Why should we have the highest interest rates ever in this country when the Socialist and Social Democratic Governments in Germany and Austria can operate at a rate 10 per cent. lower than ours when they have lower unemplyoment, lower inflation, higher wages and higher industrial activity? Should not the Government abandon their Milton Friedman policies?

Mr. Lawson

If the hon. Gentleman can see any resemblance whatever between the ramshackle and increasingly Left-wing dominated Socialist Party in this country and the Social Democrats of Germany he would do well to take another look and perhaps take a trip across the Channel to discover the truth.

Mr. Adley

Is not the simple answer to the hon. Member for Aberdare (Mr. Evans) that in West Germany and Austria there are responsible trade union organisations that appreciate the importance of productivity and would not dream of failing to understand the relationship between wage claims not backed by productivity and increasing unemployment?

Mr. Lawson

There are, as my hon. Friend suggests, many reasons why those two countries have been able to achieve considerably lower rates of inflation than we have, as a result of which, of course, they enjoy lower interest rates. The increase in interest rates over the past year in this country has been on average rather less than in most other European countries, including the Federal Republic of Germany.

Mr. Gordon Wilson

Since the Government's centralised policies, which include having an overall high interest rate, are destroying jobs in areas of high unemployment will the Financial Secretary and his Department consider the possibility of lower interest rates in areas designated as being of high unemployment in special development areas?

Mr. Lawson

If we were to reduce interest rates prematurely and excessively, thus allowing the money supply to get out of control, and allowing a resurgence of inflationary forces throughout the economy, we should do far more to increase unemployment in the regions and throughout the United Kingdom than will any result of the policies that we are now pursuing.