§ LORD BESWICKMy Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
§ [The Question was as follows:
§ To ask Her Majesty's Government what is the estimated cost of each 1 per cent. of interest charged on the present National Debt; what proportion of this cost is payable to foreign holders of Government securities; and what is the estimated total of new borrowings for 1971.]
EARL JELLICOEMy Lords, at March 31, 1969, the last date for which a comprehensive analysis by sector is published, the total National Debt as usually defined was about £33,500 million expressed in nominal terms. One per cent. of this total would be £335 million, though it does not follow, of course, that a 1 par cent. change in interest rates would have anything like this effect on the current cost to the Government of servicing the debt. Approximately 19 per cent. of the total debt is known to be held by overseas residents, but a significant proportion of this takes the form of interest free notes held by international organisations. A full analysis was published in the March, 1970, issue of the Bank of England Quarterly Bulletin and a new analysis is due to be published in the Bulletin this month. I think in fact it will be to-morrow. The noble Lord will not expect me to pre-judge my right honourable friend's Budget Statement by giving any estimate of the total of new borrowings in 1971.
§ LORD BESWICKMy Lords, I am much obliged to the noble Earl for the Answer he has given. May I ask him whether he would not agree, in general, that it is time we looked at this matter rather more rationally? Would he not agree that the advantages of the present high interest rate are now far outweighed by the disadvantages, both to the balance of payments and to the burden on industry? Could he give some assurance that 1346 there will be a more rational approach to this business?
EARL JELLICOEMy Lords, this Government, like other Governments, has a rational approach to this matter. Because of the way in which the noble Lord's question was couched, I think there may be noble Lords who exaggerate the effect of the present bank rate across the exchanges. It was estimated in the Radcliffe Report, for example, that the direct cost to the balance of payments of an increase in bank rate by 1 per cent. was at a rate of about £15 million a year. Although I could not vouch for it, I think that the sums are about accurate to-day. So far as direct cost across the exchanges is concerned, it is easy to exaggerate the effect of interest rates.
§ LORD DAVIES OF LEEKMy Lords, is the noble Earl aware that out of this ramshackle, idiotic system of the acquisitive society, with the sins and mistakes of this generation visited on those yet unborn, we shall ultimately get the acme of the acquisitive society? The National Debt was about £400 per head in the 'thirties; it is now about £1,600. It is going up in geometrical progression. Is the noble Earl aware that ultimately, under the delightful system which he sup-ports, we shall get the acme of capitalism, a millionaire born backwards; we shall owe £1 million before we have a drop of our mamma's milk?
§ LORD BESWICKMy Lords, while I accept what the noble Earl has said about £15 million being rather less than most people would believe to be the effect of a 1 per cent. increase, and while I would also say that there are some people who would beg leave to look into this subject a little more closely, may I ask whether he would not agree that there is little further advantage to be obtained by attracting the volume of "hot" money that we are now winning?
EARL JELLICOEMy Lords, this is clearly a question which my right honourable friend the Chancellor of the Exchequer has under close consideration. I quite take the point which the noble Lord has made about the dangers of attracting "hot" money. On the other hand, it is the Government's view 1347 that high interest rates at the present time are a necessary ingredient of the Government's policy of maintaining firm control over what I think are technically called the "monetary aggregates". It is one means of controlling inflation. But there is a balance here, and it is a balance which my right honourable friend the Chancellor of the Exchequer will need to keep under careful conssideration, and he will certainly do so.
§ LORD ROBBINSMy Lords, would the noble Earl agree that with prices rising by at least 8 per cent. per annum, current rates of interest, expressed in real terms, are very low?
EARL JELLICOEMy Lords, I was rather afraid that the question put by the noble Lord, Lord Beswick, might attract a supplementary from the noble Lord, Lord Robbins. I shall study very carefully what he has said, but I think I agree.
§ LORD BESWICKMy Lords, would not the noble Earl also agree that the current rate of interest is one element in the increase in the cost of production?
§ LORD SHACKLETONMy Lords, since the noble Earl referred to the Radcliffe Report, may I ask him to read it again, since practically every Government has ignored the recommendations? Indeed, their references to interest rates were applied in a different sense, and to a different argument, from the one used.
§ LORD WYNNE-JONESMy Lords, would the noble Earl agree that the attempt to control the economy by financial means has so far succeeded in controlling neither inflation nor the increase in unemployment?
EARL JELLICOEMy Lords, I think the noble Lord has a point, but it is a one-sided point, because I think he is attempting to argue that the Government's policy in these matters is, as it were, one-handed. It is multi-handed.