HC Deb 17 June 2004 vol 422 cc908-10
13. Sir Nicholas Winterton (Macclesfield) (Con)

What discussions he has had with the Governor of the Bank of England on the current level of interest rates. [179135]

The Chancellor of the Exchequer (Mr. Gordon Brown)

I meet the Governor regularly, but the level of interest rates is entirely a matter for the Monetary Policy Committee of the Bank of England.

Sir Nicholas Winterton

I am grateful to the Chancellor for that factual and accurate response to my question. Is he aware of the views of the British Chambers of Commerce on interest rates? Although it agrees that small interest rate rises may be necessary to curb inflationary features in our economy, it is also concerned that excessive interest rate rises would have a devastating effect on manufacturing industry, and might not even curb house price inflation, which is one of the problems that this country is facing.

Mr. Brown

I meet representatives of the British Chambers of Commerce regularly, and I last met its president only a few days ago. I listen seriously to what it says. It wants low inflation, which has been achieved, low interest rates, which have been achieved, and low unemployment, which has also been achieved. I thought that the hon. Gentleman was going to thank me for the 63 per cent. drop in unemployment in his constituency since we came to power.

Ms Sally Keeble (Northampton, North) (Lab)

May I tell my right hon. Friend that the east midlands regional agent for the Bank of England recently visited my constituency, where he met people from several businesses, including some manufacturers who were more optimistic than they have been for a considerable time and reported improvements in performance, because of both the stability that they have had and low interest rates? If he intends to vary the inflation targets for the Bank of England, will he take carefully into account the needs of manufacturing industry, and will he welcome the improvements in performance in the east midlands region?

Mr. Brown

I am grateful to my hon. Friend, who takes a big interest in questions of manufacturing and the state of the economy. I agree that although manufacturing output has been rising, we wish to see more progress. The important thing is that we have and maintain economic stability. She will be as pleased as I am that the rate of unemployment in her constituency has been halved under a Labour Government.

Mr. Nick Gibb (Bognor Regis and Littlehampton) (Con)

As a full-blooded and committed monetarist, the Chancellor will be more aware than many of the power and the effect that even small interest rate rises can have on the level of demand in the economy. Does he therefore share concerns about the Monetary Policy Committee's apparent fixation on house prices, and the potential damage to the real economy that excessive interest rate rises could have if implemented before the impact of recent rate rises fully takes effect?

Mr. Brown

If the hon. Gentleman wants to keep interest rates low, he will want to maintain a Labour Government. The average interest rate under the Conservative Governments from 1979 to 1997 was 10.3 per cent., and interest rates have been less than half that under a Labour Government. I seem to remember that when we made the Bank of England independent, he said: The decision to give the Bank of England independence … will, in due course, lead to unemployment increasing."—[Official Report, 11 November 1997; Vol. 300, c. 791.] We have created 2 million jobs and halved unemployment.