Interest Rates (Hansard, 14 December 2000)

§ 7. Mr. Ben Bradshaw (Exeter)
What has been the average level of interest rates set by the Bank of England since May 1997. [141839]

§ The Chief Secretary to the Treasury (Mr. Andrew Smith)
Since May 1997, interest rates have averaged just over 6 per cent. as compared with 10 per cent. in the years of the previous Government.

§ Mr. Bradshaw
Can I assure the Minister that my constituents remember all too well when interest rates 798 were 15 per cent. under the previous Conservative Government because many of them lost their homes, businesses and jobs? Has my right hon. Friend had a chance to calculate what the average mortgage payer has saved since Labour came to power? If so, may we have those figures, because they will be useful in the forthcoming general election campaign?

§ Mr. Smith
I am grateful for my hon. Friend's question. He is right to remind the House what a terrible price people paid for the high level and volatility of interest rates under the previous Conservative Government. He rightly reminds us that interest rates were above 15 per cent. for a whole year. One and a half million home owners suffered negative equity and 250,000 homes were repossessed between 1990 and 1993 alone. My hon. Friend invites me to calculate the benefits that home owners with mortgages have received from the lower and more stable interest rates that we have brought about. I can confirm that I have been able to do that calculation. Under the Conservatives, mortgage rates averaged 11 per cent. as compared with 7 per cent. under Labour. On a typical mortgage, that means a saving of £1,000 thanks to Labour's prudence and economic stability.

§ Mr. Richard Ottaway (Croydon, South)
But can the Chief Secretary confirm that his plan to scrap the pound means scrapping the Monetary Policy Committee? Can he confirm that, at the next election, there will be just one party campaigning for interest rates to be set by an independent Bank of England—the Conservative party?

§ Mr. Smith
That is an extraordinary question, especially given the fact that the shadow Chancellor has been threatening to take away from the Monetary Policy Committee the right to determine interest rates. He is the one who says, "No, I could do it better. I consider them to be incompetent." What a cheek that is against the background of the Conservatives' record in government of those variations in interest rates—15 per cent. for more than a year.
Let us remember the effects that the shadow Chancellor's policy would have on stability. First, he says that he has a tax guarantee that turns out not to be a tax guarantee. Then he says that he will make £16 billion of cuts, but he cannot say where they will come from. Then he says that it is £8 billion of cuts. When asked where they can be made, he says that it is £5.3 billion of cuts, but when one looks at those one finds that some are not even in the Budget and some are savings that we are already making.

§ Mr. Speaker
Order. It would be best if the Minister talked about his own policy.

§ Mr. Smith
The Conservatives' sums do not add up. Where we are providing stability, they would destroy it.

§ Fiona Mactaggart (Slough)
I urge the Minister not to take advice from the Conservative party on interest rates when, in the first 13 years of the previous Conservative Government, they were under 9 per cent. for only five months. In the last five years of Tory Government, they were higher than they have been under Labour. Throughout that time, we were told that we should have 799 high unemployment so that we could have low interest rates. Unemployment was more than 2 million for most of that time. As I recall, it was boom for interest rates and bust for workers. Can my right hon. Friend assure us that he will not return to that?

§ Mr. Smith
My hon. Friend is quite right; people are better off with Labour and I have no intention of taking the advice of the Conservatives.