§ 13. Mr. Leighasked the Chancellor of the Exchequer if he will make a statement on the public sector borrowing requirement following recent changes in interest rates.
§ Mr. LawsonThe Budget estimate for the PSBR for 1983–84 was £10 billion or 3.5 per cent. of GDP. The outturn will be published on Tuesday 17 April. The PSBR forecast for 1984–85 is £7.25 billion or 2.5 per cent. of GDP.
§ Mr. LeighGiven that the PSBR as a proportion of GDP has declined from 5.4 per cent. in 1979 to 3.25 per cent. today and that interest rates have declined from 12 per cent. to 8 per cent., will my right hon. Friend confirm the devastating effect that high Government borrowing has on industry's ability to borrow—in other words, the more that the Government borrow the harder it is for anyone else?
§ Mr. LawsonMy hon. Friend is right. One of the Government's main objectives in bringing the borrowing requirement down, as they have done, is to ensure that the continued reduction in inflation can be achieved alongside a steady reduction in interest rates. It is interesting to note that, since 1979, long-term interest rates in the United Kingdom have decreased by 3 per cent. while in the United States they have increased by 3 per cent.
§ Mr. AshtonIs it not more than coincidence that when the building societies wanted to increase interest rates last spring they deferred that action until after the June election and, now that they wish to reduce interest rates, they will do so in May? That will affect the rate of increase of pensioners' pay rises in November. How does the Secretary of State manage to train his poodles so well?
§ Mr. LawsonThe building societies make their own decisions in their own time. This Government, unlike the previous Labour Government, do not seek to interfere. I am sure that the House will welcome the 1 per cent. reduction in the mortgage rate announced after the Budget.
§ Mr. WrigglesworthHow will the sale later this year of £2 billion worth of BT stock and other public sector stock affect the market? Will that sale not cause crowding out as well?
§ Mr. LawsonIt will not cause crowding out. There is ample capacity for reduced Government borrowing and for equity issues in the private and public sector. That sale will assist in reducing the demands the Government must make on the gilt-edged market.
§ Mr. BudgenHow can finance determine expenditure when so much expenditure in Britain and in the EEC generally is demand-led?
§ Mr. LawsonA great deal of expenditure is not demand-led.
§ Mr. HattersleyIf there is the simple relationship between Government borrowing and interest rates that the right hon. Gentleman has just described, why is it that in Germany, Japan, Austria, Switzerland and the Netherlands there are higher levels of Government borrowing but lower long-term interest rates?
§ Mr. LawsonThose countries have been successful in reducing inflation to lower levels than Britain has so far done. Interest rates are affected by the level of inflation. The Government's policy is, therefore, a combination of getting public borrowing and inflation down.
§ Mr. Hattersleyrose——
§ Mr. SpeakerOrder. No. I call Mr. Winterton to ask question 14.