Interest Rates: Policy (Hansard, 14 November 1989)

§ The Parliamentary Under-Secretary of State, Department of Employment (Lord Strathclyde)
My Lords, the Government's policy remains to set and 1222 hold interest rates at a level which will bring down inflation. There are clear signs that this policy is working.

§ Lord Ezra
My Lords, does the noble Lord agree that at their present level interest rates continue to cause great hardship to individuals, particularly those with mortgages? Does he further agree that the problem is now spreading to industry and trade as demonstrated by the latest CBI returns issued yesterday? Is the noble Lord aware that on 31st October, in another place, his right honourable friend the Chancellor of the Exchequer said that it was absolutely right that all practicable measures should be used to deal with inflation and that they included fiscal measures? Will the Minister therefore indicate to the House whether those steps portend a change in policy?

§ Lord Strathclyde
My Lords, there is no change in policy. The Chancellor has said that it is right to use all practical levers available to bear down on inflation, and only one of those is fiscal policy. The key lever as regards inflation is monetary policy through interest rates.

Lord Bruce of Donington
My Lords, has the noble Lord's attention been drawn to an interview given to Le Soir, a Belgian newspaper, on 1st November by the chairman of the Conservative Party, in which he said: The differences arose"— the differences between the then Chancellor of the Exchequer and the Prime Minister — on general economic policy and the whole level of interest rates"? In view of the fact that the present Chancellor is widely expected to continue the policies of his predecessor, can the noble Lord say whether there is still unanimity in the Government on this point?

§ Lord Strathclyde
My Lords, I am not interested in alleged disagreements between past Chancellors of the Exchequer and my right honourable friend the Prime Minister. As I said to the noble Lord, Lord Ezra, the policy remains the same.

§ Lord Dormand of Easington
My Lords, have the Government considered varying interest rates in relation to their regional policies? Is the Minister aware that their present policy on interest rates, which will obviously continue for some time, will affect the regions first, not least the northern region? Is he further aware that the suggestion I am making is a well-established practice in the EC? Will the Government give consideration to it?

§ Lord Strathclyde
My Lords, it is not practical to have two-tier interest rates between different regions. As to the noble Lord's point about the regions being affected first, he will be aware that one of the signs that the interest rate policy is working is the cooling down of house prices. They have cooled off considerably more in the South than in the North.

§ Lord Stoddart of Swindon
My Lords, is the noble Lord aware that, with the appointment of a new Chancellor, many of us expected to see a change from the policies which have so patently failed up to now? Are the Government not aware that the continuing problem is the growth of credit? Will they now take some direct action on credit and require the banks and financial institutions to make special deposits with the Bank of England?

§ Lord Strathclyde
No, my Lords. Credit is not a problem. Only 15 per cent. of personal sector debt comes from credit. There are no plans to change that situation.

§ Lord Hughes
My Lords, is the Minister aware —

§ Lord Belstead
My Lords, if the noble Lord will forgive me, the Clerk of the Parliaments has announced the next Question.