HL Deb 12 March 1973 vol 340 cc4-6
LORD BOOTHBY

My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether, as part of their drive to increase industrial investment and economic growth, one objective of their economic policy will be to bring down, gradually, the present very high level of interest rates.

EARL JELLICOE

My Lords, in reply to the first Question standing in the name of the noble Lord, Lord Boothby, Her Majesty's Government are determined that inflation shall be curbed, and one of the benefits of success in so doing will be a decline in interest rates. In our view the most effective encouragement to industrial investment is the assurance of substantial growth and steadier prices—and it is precisely this assurance that our policies are designed to give.

LORD BOOTHBY

My Lords, while thanking the noble Earl for his reply, may I ask whether the Government realise that excessive interest rates, continued for a long period, are in themselves a primary cause of inflation; that they press most heavily on the poor—especially on those trying to raise mortgages; that they are a direct disincentive to investment in productive industry; and, finally, if they continue for a long time they will prevent the funding of the Government debt? For all these reasons does the noble Earl think that he can give some encouragement to the business community and, indeed, the community in general, that the main effort of the Government will be to reduce interest rates rather than allow them to increase?

EARL JELLICOE

My Lords, while not dissenting from some of the propositions which the noble Lord has advanced, I would say that it is because we have these disadvantages of high interest rates in mind that we are determined in the shortest term possible to do everything that we can to bring down the rate of inflation to a tolerable level.

LORD ROBBINS

My Lords, would the noble Earl not agree that corrected by the rise of last year in the cost of living the present level of interest rates is not at all excessively high but is nearer zero than appears on the surface?

EARL JELLICOE

My Lords, I certainly agree that it is misleading to look solely at nominal interest rates; and if that is the proposition that the noble Lord, Lord Robbins, speaking with his expertise, is advancing, I would not dissent.

LORD BESWICK

My Lords, may I ask how the noble Earl reconciles what he has just said with the Answer he gave to the noble Lord, Lord Boothby, in which he said that he agreed with most of the propositions advanced by the noble Lord, Lord Boothby? And would the noble Earl not agree that high interest rate is one factor in the increase in the cost of living?

EARL JELLICOE

My Lords, I think if the noble Lord, Lord Beswick, looks at Hansard as carefully as I have considered my reply to those supplementary questions he will see that I am balancing delicately, without falling off, on a rather difficult tightrope suspended for me by the two noble Lords.

LORD BOOTHBY

My Lords, may I, in conclusion, ask the noble Earl whether he would dissent from the observations made by the noble Lord, Lord Robbins?

EARL JELLICOE

My Lords, I am trying hard not to dissent from the observations made by either noble Lord, and I think my failure to dissent is perfectly compatible with the position.

LORD BESWICK

My Lords, while the noble Earl is still balancing on his tightrope will he tell the House why, if it is necessary to have these high interest rates, the Chancellor insists on maintaining that the interest on loans shall be an allowable factor for tax purposes, thus effectively cutting in half the interest rates paid?

EARL JELLICOE

My Lords, I should prefer to answer that supplementary question when we debate the Budget. There is plenty to answer in this respect and I would much prefer at this stage not to be drawn into a long discussion on monetary policy in a Question and Answer period.

LORD BESWICK

My Lords, does that mean that the noble Earl finds it impossible to maintain his position on the tightrope?