§ The Chancellor of the Exchequer (Mr. Norman Lamont)
None. The United Kingdom has the lowest short-term interest rates in the European Community.
§ Mr. Sykes
I am grateful to my right hon. Friend for that reply. Is he aware that in Scarborough and Whitby, England's two finest resorts, we have many successful companies, such as McCain Foods makers of oven chips, and Pindar Graphics, and that interest rates and exchange rates are so competitive that great British companies such as those are winning orders hand over fist at home and abroad?
§ Mr. Lamont
I am sure that my hon. Friend's constituency is typical of many that are benefiting from the reduction in interest rates. That is being reflected in high streets throughout the country. Retail sales in the last three months are up 1 per cent. on the previous three months and are the highest since 1990. In the car industry—it is not so strongly represented in my hon. Friend's constituency, although car retailers are—we have also seen an increase in recent months. There is no doubt that the economy is benefiting from the reduction in interest rates, which I believe will work through increasingly into other parts of the economy.
The key consequence of the reduction in interest rates is through mortgage rates. There have already been substantial reductions in mortgage rates, but many people, particularly those with annual mortgages, have yet to see—they will do so early in the new year—further, very substantial, reductions in their mortgage rates. That will help consumer spending very considerably.
§ Mr. Beith
Does the Chancellor accept that lower short-term interest rates, although welcome, are not likely to have as rapid an impact on the economy as, for example, contracts held by companies that benefit from increased spending on public works? Does he recognise that many small businesses do not have confidence that interest rates will remain low and that they are at a disadvantage compared with businesses in many other European countries, because they are much more dependent on short-term interest rates than those businesses?
§ Mr. Lamont
I am very surprised by the right hon. Gentleman. We have had from him and his hon. Friends on the Liberal Bench and from Labour Members nothing 982 but pressure to reduce interest rates. We now have the lowest interest rates in the European Community. That is good for our economy, and nobody can gainsay that.
§ Mr. John Townend
Leaving aside the remarks of the right hon. Member for Berwick-upon-Tweed (Mr. Beith), does my right hon. Friend take encouragement from the fact that the very low rates of interest in America are now resulting in significant economic growth in that country? Does he agree that that gives enormous opportunities to British exporters, in view of the more competitive pound, and that countries that remain in the exchange rate mechanism will see no significant recovery until the Bundesbank reduces its rates?
§ Mr. Lamont
It is certainly true that recovery is strongly under way in the United States, based on the low interest rates that have obtained there for some time. Given that a higher proportion of our exports goes to the United States than do the exports of other European Community countries, we stand to benefit enormously. I have made clear for many months my belief that it would be for the benefit of the European economy if interest rates in Europe were generally lower.
§ Mr. Gordon Brown
On the question of a co-ordinated reduction in interest rates, does the Chancellor support the Christopherson European recovery plan? Why is the French Finance Minister and not the British Chancellor taking the lead with new proposals for a European recovery programme? Why has the issue of unemployment been relegated on the British agenda for Edinburgh from the formal session to a mere open-ended discussion over lunch? Will the right hon. Gentleman not realise, even at this late stage, that the test of the British presidency is whether the Government will show the political will to take a lead in reducing unemployment?
§ Mr. Lamont
As question 5 is on that subject, I do not know why the hon. Gentleman could not hang on and ask a supplementary question that is relevant to the question tabled. He may insist on asking an irrelevant question but I shall give a relevant answer. First, the Christopherson plan has nothing to do with interest rates, so the hon. Gentleman should be clear about that. Secondly, we shall discuss at Edinburgh with other member states a package of measures designed to get the European economy moving again. Contrary to what the hon. Gentleman says, this country has led the way with the package that I announced in my autumn statement: greater priority for capital programmes, with tight control over current spending; special help for the housing market and the construction industry; and additional incentives for private sector investment. Moreover, in the past couple of months, I have announced three percentage points off interest rates, which is providing significant extra help to British business and those with mortgages. At Edinburgh, we shall suggest that others in Europe follow Britain's lead.