Interest Rates (Hansard, 14 July 1988)

§ 10. Mr. John Evans
To ask the Chancellor of the Exchequer if he will estimate the cost to manufacturing industry of the cumulative rise in interest rates since 1 June.

§ Mr. Lawson
Bank base rates currently stand at 10 per cent. This is roughly in line with the average level of interest rates during the last five years, during which manufacturing output has increased by over 20 per cent.

§ Mr. Evans
Does the Chancellor accept the CBI's figures, which show that the five interest rate increases that we have had since 1 June have cost industry about £25 million, that industry is now bearing the brunt of his policies and that in the long term his policies, which might prove beneficial to financiers in the City of London, are proving disastrous for what is left of manufacturing industry in Great Britain?

§ Mr. Lawson
The hon. Member really is living in a world of his own. If he were to go out into the real world, if he were ever to meet anyone in manufacturing industry, if he were ever to see inside a manufacturing company, he would realise that manufacturing industry is doing better than ever before. Manufacturers know this and acknowledge it.

§ Mr. Duffy
Given the Chancellor's earlier reference to the Tokyo property market, is he prepared to say that the Prime Minister's insistence on tax encouragement to wealthy people to buy high-priced dwellings, thereby unnecessarily boosting credit, is not bringing his interest rate policy at some point into conflict with noninflationary growth and jeopardising the investment plans of manufacturing industry at its lower, smaller end?

§ Mr. Lawson
At the time of the Budget I felt that there was a case for cutting back on the extent of that sort of credit. That is why I removed the multiple mortgage relief for sharers and abolished altogether the relief on home improvement loans. I am not sure whether the hon. Gentleman voted for those clauses. I seem to recall that he did not.

§ Mr. Charles Wardle
Is it not the case that the increased interest cost to manufacturing industry can largely be offset by sensible wage settlements?

§ Mr. Lawson
Yes, my hon. Friend is right.

§ Mr. Yeo
Does my right hon. Friend agree that industry is more concerned about the level of inflation than the level of interest rates and that there is widespread recognition of his successful use of interest rates as a means of keeping inflation down?

§ Mr. Lawson
My hon. Friend is absolutely right. It is something that I have said time and time again. I have shown by my actions that interest rates will be set at whatever level is necessary to bear down on inflation.