HC Deb 20 March 1980 vol 981 cc621-3
5. Mr. Meacher

asked the Chancellor of the Exchequer what estimate he has made of the effects of current interest rates on the profitability of the banking sector.

Mr. Lawson

No precise estimate is possible. Current interest rates clearly contribute to high bank profits but the effects are likely to differ greatly in different parts of the banking sector.

Mr. Meacher

Will the Financial Secretary say why a doubling of profits to a huge level by Shell and other oil companies is apparently regarded by the Government as justification for a windfall profits tax while a doubling of profits to a huge level by Lloyds and other banks is not? In what way are MLR-induced excess profits, brought about by the Government's economic policies, of any more merit than OPEC-induced profits?

Mr. Lawson

The hon. Gentleman may expect oil prices to fall over the coming year, as interest rates are likely to fall, but I regard that as less likely. As to the taxation of bank profits, the Prime Minister has already said that we are putting our minds to that in the context of the Budget.

Mr. McCrindle

Will my hon. Friend move very slowly and cautiously before contemplating the imposition of an excess profits levy on the banks in the present circumstances, unless he is prepared to introduce the opposite measure at a time when banks profits are falling? Will he bear in mind the dangerous weapon that that policy would put into the hands of the Labour Party in the event of a future Labour Government?

Mr. Lawson

I am glad to be able to reassure my hon. Friend that I always move cautiously in everything that I do, as does my right hon. and learned Friend the Chancellor of the Exchequer. My hon. Friend is right to make it clear to Opposition Members—who may not understand this—that there are technical complexities involved here.

Dr. Bray

Does the Financial Secretary agree that, had he and his fellow Treasury Ministers had their way and introduced monetary-based control at an earlier stage, bank profits would have been even higher than they are at present? Will he confirm that the green paper on monetary control, published today, represents an abandonment by Treasury Ministers of any serious intention to move to a monetary-based control system?

Mr. Lawson

The green paper certainly evinces a somewhat sceptical attitude to the merits of monetary-based control, but, nevertheless, it is a discussion document. We intend to enter the discussions in good faith and see what emerges.

Mr. Dykes

If interest rates have to rise again, will my hon. Friend consider holding discussions with the banks about the weakest and smallest borrowers—who often have to pay the highest borrowing rates—with a view to those people being giving an easement in borrowing rates?

Mr Lawson

I hope that it will not be necessary for interest rates to rise again. I am sure that my hon. Friend will understand that our top priority is the battle against inflation. If it is necessary—and I profoundly hope that it will not be—for interest rates to rise further in the battle against inflation, they will have to rise.