Interest Rates (Hansard, 30 April 1981)

§ 10. Mr. Cryer
asked the Chancellor of the Exchequer what representations he has received regarding a further reduction in interest rates.

§ 16. Mr. Newens
asked the Chancellor of the Exchequer what is his latest assessment of the prospects of a further fall in interest rates.

§ Sir Geoffrey Howe
The 2 per cent. reduction in MLR which I announced in the Budget has been widely welcomed. I am aware, however, that industry would like to see interest rates reduced further, and this is a desire we all share.

§ Mr. Cryer
Is it not true that the high interest rates imposed by the Government have cost the nation hundreds of thousands of jobs and sent thousands of small firms to the wall? Have not representations been made by both sides of industry for a reduction in interest rates? Is it not the case that the Government are using unemployment as a weapon against working people and the trade unions and that they will not reduce interest rates because they see them as being to their political advantage?

§ Sir Geoffrey Howe
I cannot imagine the kind of world in which the hon. Gentleman lives if he believes that the Government—or anyone else—want to see unemployment increase. All our policies, including those for interest rates, are directed towards securing improvements in the economy and in the level of employment. The House should take notice of the fact that short-term interest rates in Great Britain today are below those in the United States and France, and below the average for OECD countries.

§ Mr. Newens
Does the right hon. and learned Gentleman realise that, despite his boasts about inflation, interest rates have never fallen below the level that existed when the Government took office? Is he aware that, despite what he says, many industrialists in Europe continue to enjoy considerably lower rates of interest? Is it not fair to say that in this respect industrialists and borrowers have rarely—and certainly never since the war—been worse served by a Government than they have been by this Government?

§ Sir Geoffrey Howe
The hon. Gentleman needs to be reminded of the fact—which I have just stated—that short-term interest rates in this country are below those in the majority of OECD countries. That is an important factor. The minimum lending rate has fallen by 5 per cent. since last summer. The CBI estimates that every point reduction reduces interest rates paid by companies by about £350 million. That is a significant improvement.

§ Mr. Peter Lloyd
But is my right hon. and learned Friend satisfied that public sector borrowing has been reduced sufficiently to enable the private sector to finance a sustained recovery, without driving up interest rates again?

§ Sir Geoffrey Howe
The judgment that I made in my Budget was designed to secure the result that my hon. Friend wishes to see.

§ Mr. Ashley
If the right hon. and learned Gentleman says that the whole of his policy is directed towards reducing unemployment, will he accept that the present level of unemployment is an indictment and a clear indication of the failure of those policies?

§ Sir Geoffrey Howe
No, Sir. The present level of unemployment is caused by many factors, including the necessary process of conquering inflation and factors operating in the world outside. Our policies are directed, as the right hon. Gentleman would wish, to securing a recovery of the economy, including a recovery in the prospects for employment.

§ Mr. Body
Does my right hon. and learned Friend agree that any consideration of interest rates should have regard to the rate of inflation? It is not unreasonable for interest rates to be 3 per cent. above the rate of inflation.

§ Sir Geoffrey Howe
I agree with my hon. Friend that one has to consider the rate of inflation, among many other factors. It is relevant that the interest rate is positive, as he says.