§ 2. Mr. Worthington
To ask the Chancellor of the Exchequer how many letters he has received from members of the public on the high level of interest rates or their impact on the cost of mortgages.
§ The Chancellor of the Exchequer (Mr. Nigel Lawson)
A large number.
§ Mr. Worthington
I am surprised at that because it is rare for people to write to the deaf and blind. In replying to the many people who have written to him about the catastrophe of mortgage rates, which means that the average householder taking out a mortgage will be more than £1,000 a year worse off, will the Chancellor explain that there is no external cause for this cut in their standard of living? Will he explain that the responsibility lies solely with his own mismanagement of the economy? Will he apologise to the British people for this?
§ Mr. Lawson
As to the hon. Gentleman's first point, I do not for a moment regard myself as being deaf—in fact, I heard his question very clearly. I am surprised that he suggests that it is unusual to write to the deaf because that is the most convenient method of communication. As for the question of interest rates, I have made it clear time and time again that it is necessary to keep interest rates as high as is needed for as long as is needed to get on top of inflation. Getting inflation out of control—getting it to the sort of levels it was under the last Labour Government —would be far more damaging for home owners. There is another thing on interest rates; what we will not have is the 250 negative real interest rates that there were under the Labour Government which robbed pensioners of their lifetime savings.
§ Sir Anthony Grant
While recognising the overriding importance of the control of inflation, may I ask my right hon. Friend, with his fertile and imaginative mind, not to give up the quest for alternative methods to the crude one of interest rates? Does he recognise that interest rates are all very well for the haves but bear very cruelly on the have-nots, particularly the groups which he and I have always supported: small businesses and home owners?
§ Mr. Lawson
Of course, my hon. Friend is right, and I have acknowledged on a number of occasions that higher rates do impose a burden on many home owners, particularly those with large mortgages and, indeed, on many small businesses. However. I have to tell him that there is no alternative and he would be deluding the House to suggest that there is an alternative to high interest rates if one is serious about getting inflation down. The plain fact is that it would be very much worse for all those concerned if inflation were to go up again.
§ Mr. Beith
With so many people facing this crippling burden of high interest rates and with the Chancellor apparently unable to take up the option of an early exchange rate mechanism, can we get it clear: are the interest rate increases dictated by a fear that the money supply is growing too fast or a feeling that the pound has been falling too far?
§ Mr. Lawson
The interest rate increases are clearly designed to deal with the problem of inflation—to get on top of inflation and to bear down on inflation. Inflation is affected both by the exchange rate and by domestic factors —every schoolboy should know that, even the hon. Gentleman.
I must say, too, that this is not peculiar to this country. As the hon. Gentleman and my hon. Friend the Member for Cambridgeshire, South-West (Sir A. Grant) will be aware, earlier this month, in order to deal with an inflationary problem which varies from country to country but which each country is concerned about, there was a rise in interest rates throughout most of Europe.
§ Mr. Arbuthnot
Will my right hon. Friend confirm that some people spend all their time complaining about the cost of high interest rates to borrowers without at the same time recognising that those same interest rates bring high rewards to savers, thus encouraging what we want to encourage and discouraging what we want to discourage?
§ Mr. Lawson
My hon. Friend is absolutely right: this does bring considerable benefit to savers. I can tell the hon. Member for Clydebank and Milngavie (Mr. Worthington) that I have a large number of letters from savers—perhaps not quite as many—and from pensioners saying how pleased they are with the higher return on their savings. So I receive those sorts of letters, too.
We know what the Labour party will do because the gaff was blown by the hon. Member for Dagenham (Mr. Gould) last Sunday, when he said:What we're saying, is that if there is a problem in terms of managing the degree of credit growth in this economy it has to be at the margin when new mortgages are being granted.251 In other words, Labour policy will be to stop new mortgages being granted to everyone except new home buyers, causing a total seize-up in the housing market, with disastrous effects.
§ Mr. Gordon Brown
When will the Chancellor issue a word of regret, apology or sympathy for the problems that he has caused millions of homeowners in the form of the £10 billion extra that they will have paid in mortgage payments by the end of the year and the £1,000 on average that the typical homeowner is having to pay? Does he still repeat the advice that he gave a year ago to home owners —that they should cut back on something else—or does he accept that thousands of home owners have nothing else to cut back on?
§ Mr. Lawson
Home owners are in many cases cutting back on something else and deferring other purchases—that is part of the process by which the necessary slowdown in the economy is occurring. What is happening now will be nothing like as bad for the cause of home ownership and the housing market generally as the Labour party policy of putting a complete block on new mortgages.