§ Mr. Dubsasked Mr. Chancellor of the Exchequer what representations he has received about the effect of present interest rates.
§ The Financial Secretary to the Treasury (Mr. Nigel Lawson)My right hon. and learned Friend has received a number of representations in recent months on the effect of the current level of interest rates, in particular from business men and home owners.
§ Mr. DubsDoes the Financial Secretary think that the present high rates of 621 interest are a consequence of the rate of inflation or a major contributor to it?
§ Mr. LawsonIt is clear that the present high level of interest rates is in part a consequence of the level of inflation and in part a necessary instrument in bringing inflation down. Of course, the hon. Gentleman will be well aware that this is a world-wide phenomenon. Interest rates throughout the world have gone up just as much as they have in Britain since May. The United States rate is now 19 per cent.—higher than ours.
§ Mr. Peter BottomleyGiven the Government's monetary policy, am I right in thinking that, if the general level of pay settlements next year is half the rate it is this year, it would be associated with a greatly reduced level of interest?
§ Mr. LawsonMy hon. Friend is right. As inflation comes down interest rates will come down.
§ Mr. Robert SheldonGiven the Financial Secretary's confusion about whether high interest rates are a cause or a consequence of inflation, does he think that it is just possible that, like indexation, high interest rates are the institutionalisation of inflation?
§ Mr. LawsonThe right hon. Gentleman is both confused and deaf. At no time did I say that interest rates were a cause of inflation.
§ Mr. Denzil DaviesTo clarify the matter, does the Financial Secretary agree with the Governor of the Bank of England that we are unlikely to see a fall in interest rates for many months and that, until inflation falls, there is not likely to be a reduction in interest rates?
§ Mr. LawsonThe Governor of the Bank of England was speaking before he had seen the contents of my right hon. and learned Friend's Budget.