HL Deb 16 July 1980 vol 411 cc1770-1

2.44 p.m.


My 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 whether they support the call made recently by Mr. Walter Goldsmith, Director General of the Institute of Directors, for clearing banks to reduce voluntarily their current windfall profits by temporarily lowering the rates of interest charged to small and medium-sized commercial borrowers to no more than one or two percentage points above MLR, thereby helping British industry at this critical time.

The MINISTER of STATE, TREASURY (Lord Cockfield)

My Lords, rates of interest charged to individual borrowers are a matter for the banks themselves. The best service the Government can give is to maintain their present policies which will bring down inflation and allow progressive reductions in inter- est rates. As the noble Lord is aware, MLR and bank base rates have already been reduced by one percentage point.


My Lords, I thank the noble Lord for that reply, somewhat non-committal though it was. Is he aware that the Daily Telegraph suggested in a recent leading article that the Chancellor of the Exchequer, Sir Geoffrey Howe, had made a mistake in not imposing an excess profits tax on the banks in his recent Budget? With that in mind, would the noble Lord agree that it would be a most public-spirited gesture on the part of the banks if they were voluntarily to reduce the rates of interest on overdrafts and loans to smaller companies at this extremely difficult time, particularly bearing in mind that the number of liquidations in the first six months of this year is three times as high as in the similar period of 1979?


My Lords, to answer the first part of the noble Lord's supplementary question, the question of a tax on the banks' windfall profits was dealt with in the Budget speech of my right honourable friend the Chancellor of the Exchequer on 26th March and I have nothing to add to what he said on that occasion, other than that with the fall in MLR, and we hope the progressive reduction in interest rates, this will reduce the level of windfall profits accruing to the banks. So far as the second part of his supplementary question is concerned, it is of course a very proper activity for both representative bodies such as the institute of Directors and newspapers such as the Daily Telegraph to make representations to the banks, but it does not follow that it is the function of the Government to do so.