§ 11. Mr. David EvansTo ask the Chancellor of the Exchequer when interest rates were last at 10 per cent.
§ Mr. Norman LamontBank base rates last stood at 10 per cent. in July 1988.
§ Mr. EvansI thank my right hon. Friend for his reply. Will he tell mortgage payers and businesses, in language that they can understand, why interest rates are not 2 per cent. lower? Is he aware that every time he reduces interest rates the banks put them up by 0.5 per cent. or 1 per cent. so that businesses are not at present benefiting from his policy on interest rates? Is he running the economy, or is it being run by the Governor of the Bank of England?
§ Mr. LamontOn the first point, it is not true that the benefits of the reductions in interest rates have not come through to mortgage payers. As I explained earlier, the result of the 3 per cent. drop in interest rates since last October has been a payments reduction of about £50 per month for the average mortgage payer. That is a very dramatic improvement in take-home pay. Furthermore, as a result of competition between the banks and the building societies, the first-time buyer has seen an even bigger decrease. The market is working, and it is following interest rates down.
§ Mr. WigleyIf the inflation rate is coming down as rapidly as the Government believe, if sterling is so strong against the deutschmark and if consumer demand and manufacturing investment are low, surely the time has come to reduce the base rates further in order to stimulate the economy.
§ Mr. LamontI do not believe that it would be right to reduce interest rates in order to stimulate the economy, as the hon. Gentleman puts it. Interest rates should, indeed, bear a relationship to inflation.