§ 2.54 p.m.
§ Lord DiamondMy Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what steps they propose to reduce interest rates.
§ Lord BeaverbrookMy Lords, short term interest rates will continue to be held at whatever levels are necessary to maintain downward pressure on inflation.
§ Lord DiamondMy Lords, I am grateful for that Answer which does not take the matter very much further. What I am really interested to know is this. When, but for the intervention of the Bank of England at the request of the Government interest rates would have fallen, why the Government then continues to insist on imposing on every businessman and on every house buyer this wholly excessive burden?
§ Lord BeaverbrookMy Lords, the fact is that decisions on interest rates can be made only in the light of careful assessment of monetary conditions and changes made only when required to maintain steady, but not excessive, downward pressure on inflation.
§ Lord EzraMy Lords, would the noble Lord not agree that delay in reducing interest rates at the present time is having three harmful effects: first, it is creating uncertainty; secondly, it is causing borrowers, particularly in industry, to pay more than they otherwise would; and, thirdly, it is pushing up the value of currency and thus diminishing the competitiveness of British goods abroad? Are the Government taking these factors into account?
§ Lord BeaverbrookMy Lords, we are taking all factors into account in assessing the level of interest rates that are appropriate. As regards industry, company liquidity and profitability remains strong and relaxation of monetary policy fuelling inflation would be a far greater threat to industry than current levels of interest rates.
§ Lord MellishMy Lords, coming into the Chamber today, I read on the tape that interest rates went down at midday. I should like to ask whether that is right?
§ Lord BeaverbrookYes, my Lords.
§ Lord MellishWell, why did the noble Lord not say so?
§ Lord BeaverbrookWell, my Lords, because I was not asked that Question.
§ Lord O'Brien of LothburyMy Lords, is the Minister aware that according to the tape machine in your Lordships' Lobby, interest rates are on the point of going down?
§ Lord BeaverbrookYes, my Lords, I have just covered that point.
Lord Bruce of DoningtonMy Lords, in that case, will the noble Lord give the House an indication as to what are the Government's views on the fact that, even allowing for the derisory half per cent. by which interests rates are said to have declined today, the commercial bank prime rate still remains four and a half percentage points above those obtaining in Germany and Holland, two percentage points above those obtaining in France, and four percentage points above those in the United States? Have the Government endeavoured to arrive at any rationale on that position?
§ Lord BeaverbrookMy Lords, yes; but I should point out that the inflation rate in this country is still considerably higher than in all our main competitor countries, except Italy.
§ Lord Simon of GlaisdaleMy Lords, is not the most potent domestic way of reducing interest rates to curtail, contain and progressively reduce, public borrowing?
§ Lord BeaverbrookYes, my Lords; but unfortunately it is not quite as simple as that. There are many other factors that we have to take into account.
§ Lord DiamondMy Lords, perhaps I may express my deep appreciation to the Government for having brought down interest rates just before the Question came to be answered, having regard to the fact that my Question was put down some weeks ago. Will the noble Lord say whether it is correct (and I have not seen this on the tape) that the other half per cent. will come immediately after the Budget?
§ Lord BeaverbrookMy Lords, I do not think that your Lordships' House would expect me to comment on that matter. However, I think that the success of the interest rates strategy is demonstrated by the fact that inflation is at its lowest level for 20 years and that we are in our sixth successive year of economic growth.