§ Mr. Hannam
asked the Chancellor of the Exchequer whether he has made any estimate of the additional cost to the public sector of the increased level of minimum lending rate since 15 November 1979.
§ Mr. Lawson
It is not possible to assess the final cost to the public sector of a rise in interest rates with any degree of accuracy. There will be a first-round effect in terms of higher debt servicing costs, but over time this increase does not represent the true impact. MLR was raised in November 1979 as part of the Government's strategy to defeat inflation. Had interest rates in the intervening period been lower, inflation would not have come down so rapidly. This, too, would have affected costs in the public sector.