HC Deb 07 July 1983 vol 45 cc392-3
3. Mr. Loyden

asked the Chancellor of the Exchequer what estimated forecast he has made of the level of inflation and the level of interest rates for June 1984.

The Chancellor of the Exchequer (Mr. Nigel Lawson)

The forecast published at Budget time for the rise in the RPI in the year to the second quarter of 1984 was 6 per cent. Inflation since the Budget has been running at a lower rate than was then expected. It is not the practice to publish forecasts of interest rates: prospects for reduction depend on the maintenance of sound fiscal and monetary conditions and low inflation, and on developments in the rest of the world.

Mr. Loyden

Will the Chancellor of the Exchequer now come clean and admit that his party has perpetrated a massive fraud on the British people, that the election propaganda was a con trick, and that he and his hon. Friends intend to squeeze further the unemployed and social security claimants to pay for a crisis that is not of their making, but that of the Government, because of the obscene and callous policies that they are pursuing?

Mr. Lawson

I am glad that the hon. Member has got that off his chest. I assure him that we shall maintain sound fiscal and monetary policies. As for further details of what the hon. Member perhaps has in mind, I suggest that he should wait until I make my statement a little later this afternoon.

Mr. Eggar

With regard to the future course of interest rates and inflation, is my right hon. Friend satisfied with the current performance of the monetary aggregates?

Mr. Lawson

I think that there is some cause for concern over the recent performance of the monetary aggregates. That is one reason why I am introducing certain adjustments, to which I shall refer in the course of my statement this afternoon.

Mr. Wainwright

With regard to interest rates, how much longer does the Chancellor of the Exchequer intend to go on crippling the competitiveness of British industry by unnecessarily high interest rates and the excessive value of sterling associated with them?

Mr. Lawson

On the contrary, the level of interest rates in Britain at present is the lowest it has been, with one small exception, for a very long time.

Mr. Forman

Whatever else happens to the economy between now and June 1984, is it not a matter of great concern to my right hon. Friend that the real rate of interest is now so high? What action do he and his colleagues in the Government intend to take internationally to try to get the real rates of interest down?

Mr. Lawson

My hon. Friend is right in saying that it is an international phenomenon. Real rates of interest—it is difficult to calculate precisely what they are—are higher than they have been historically over the long run throughout the world. They are now falling, I am glad to say, and I believe that they will continue to fall, provided that the countries of the world continue to pursue the sound economic policies that were agreed at the Williamsburg economic summit.

Mr. Robert Sheldon

Is the Chancellor of the Exchequer aware that the levels of real interest rates have been historically high, not just for a short period, but for a prolonged period? How can he hope for a recovery to do anything but peter out so long as interest rates remain at those high levels?

Mr. Lawson

I am glad that the right hon. Gentleman is concerned, as I am, about the level of interest rates. I am sure that, because of his concern, he will welcome the statement that I shall make later today.

A Labour Government, were there to be such a creature, would no doubt in the short run get real interest rates very low. They would get them to a negative point, as they did previously, with inflation rising so high that it would go far above the level of interest rates, but that would not be of any benefit to industry or to the economy as a whole.