§ Mr. Austin Mitchell
asked the Chancellor of the Exchequer, further to his reply dated 4 February concerning the relationship between public expenditure and the rate of inflation, whether the assumed increase in private sector output as a result of the reduction in public expenditure more than compensates for the reduction 446W in output/incomes as a result of the reduction in expenditure; and if so, what is the mechanism which allows interest rates to fall despite the higher level of activity.
§ Mr. Biffen
Output can grow at a satisfactory rate in the long run only if inflation has first been greatly reduced, and interest rates lowered so as to encourage private sector activity. For the precise mechanisms, I refer the hon. Member to the reply my hon. Friend gave on 17 March 1980.—[Vol. 981, c.29–30].