§ Mr. SillarsTo ask the Chancellor of the Exchequer what recent representations he has received against his present policy on interest rate levels from organisations representing the self-employed; and what replies he has sent.
§ Mr. RyderMy right hon. Friend and I have received a number of letters from organisations representing the self-employed. The replies explain that everyone has far more to fear from inflation than from a period of higher interest rates.
§ Mr. SpearingTo ask the Chancellor of the Exchequer whether he has made any estimate of the additional savings available for investment by leading institutions made available by each 1 per cent. increase in base interest rate.
§ Mr. RyderNo. Certainly, higher interest rates encourage saving and reduce lending. But it is by no means true that all United Kingdom savings go to lending institutions, nor that lending institutions obtain their funds solely from United Kingdom savers. More generally, mortgage and other credit rationing is not a feature of the present day financial system. Lenders are constrained by the demand for credit at prevailing interest rates. Interest rates represent the price of money and credit, and naturally their demand falls when the price is raised. The relationship is complex, but the direction and the significance of the effect are clear.