HL Deb 15 June 1981 vol 421 cc430-2

2.49 p.m.

Lord Beswick

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 what initiatives they have taken with allies of the western world to secure agreement designed to prevent competitive interest rates.

The Minister of State, Treasury (Lord Cockfield)

My Lords, the present high level of interest rates in most countries reflects essentially the need to check monetary growth to curb inflation. Lower interest rates will be achieved not so much by initiatives of the kind the noble Lord has in mind, but by firm fiscal and monetary policy leading to a fall in the rate of inflation.

Lord Beswick

My Lords, I am aware of the noble Lord's doctrine about high interest rates, but I am talking about the artificial and excessive interest rates that occur, for example, in the United States at the present time. Does the noble Lord not agree that whatever short-term improvements there may be to a domestic statistic in the United States, for example, at the present time they are far outweighed by the damage done to the international trading community? Would the noble Lord also not agree that if we are interested in the stability and security of the western world it is as important to get some sensible cooperation in these monetary matters as it is in the military field?

Lord Cockfield

My Lords, we are all anxious to see lower rates of interest. But I do not think that the American Administration would accept the noble Lord's description of American interest rates as being either arbitrary or excessive. He will be interested to know, as I hope he does, that in the last few weeks rates of interest in the United States have already begun to fall. In terms of the long-term health of the international community, the overriding requirement is to reduce the rates of inflation. This does from time to time entail maintaining interest rates which are higher than any of us would like to see.

Lord Hankey

My Lords, are the Government aware that almost everybody in the House will agree with what the noble Lord has said today. But I think that the Question of the noble Lord, Lord Beswick, was to draw attention to the instability of interest rates. Would the Government agree that, when American rates go up very suddenly to an unprecedented level of 20 or 21 per cent., it draws a lot of funds out of the other members of the OECD and has very undesirable effects on their domestic situation? Would it not be advisable to go back in some degree to the principles of the OECD, which are that we should try to conduct our economic policies in such a way that we damage other people's economies as little as possible? If I might ask the noble Lord one more question, would it not be a good idea to ask the Group of 10 to discuss this problem a little more often?

Lord Cockfield

My Lords, I am not at all certain that the noble Lord was asking a question as much as making a long statement of policy. Of course, in principle, we all agree with international collaboration. I am sure that all countries pay regard to the effect of their policies on other people. But it would be quite wrong to regard the weakness of some of the European currencies at present as being primarily the result of funds being siphoned off to the United States, as a result of the high rates of interest prevailing there.

Lord Beswick

My Lords, may I ask the noble Lord to consider that, when he has time to read what the noble Lord on the Cross-Benches had to say, he will find that it was, indeed, a very relevant question? May I ask the noble Lord further whether I am to gather from what he has told me that the answer to my original Question is, No, sir?

Lord Cockfield

My Lords, if the noble Lord is looking for a very brief reply to his question, the answer is that the Government recognise the overriding need for reducing rates of inflation worldwide. This means, from time to time, that rates of interest are seen which are higher than one would normally like to have.

Lord Beswick

My Lords, may I press the noble Lord? I asked what initiatives have been taken to try to secure agreement. Is the answer to that question, none?

Lord Cockfield

My Lords, I, in fact, specifically answered the noble Lord when I said in my reply: Lower interest rates will be achieved not so much by initiatives of the kind the noble Lord has in mind, but by firm fiscal and monetary policy".

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