§ Mr. MitchellTo ask the Chancellor of the Exchequer if he will list for each year since 1970(a) the nominal and real rate of interest and (b) the change in the nominal and real rate of exchange based on relative unit values for manufactures based on the second half of 1973 equals 100. [2025]
§ Mrs. LiddellThe information requested falls within the responsibility of the Chief Executive of the Office for National Statistics. I have asked him to arrange for a reply to be given.
Letter from Tim Holt to Mr. Austin Mitchell, dated 24 June 1997:
The Chancellor of the Exchequer has asked me to reply as the Director of the Office for National Statistics to your recent question (2025) on the nominal and real rate of interest.The attached table shows nominal and real rates of interest for the dates requested. The real rate of interest is the nominal rate of interest deflated by a measure of price change over 12 months. There are many different interest rates and price indices and therefore many ways of calculating real interest rates. However, interest rates move in line and thus overall movements provide an accurate indication of general movements.The retail banks' base rate was used to represent the interest rate. This is the rate of interest retail banks lend to each other and can be considered the market interest rate for the UK economy. It moves in line with the Bank of England's Minimum Lending Rate (the minimum rate the Bank discounted bills to relieve money market shortages), which represents the cost of borrowing for retail banks from the Bank.458WThe nominal rate of interest was deflated by the average annual change in the retail prices index excluding mortgage interest payments (RPIX), except between 1970–1976 where the headline retail price index (RPI) was used. RPIX was used in preference to RPI, since i) the nominal interest rate is a priori sensitive to changes in mortgage rates and ii) the real interest rate is compatible with the Government's chosen inflation target measure. Data for RPIX between 1970 and 1976 was not available.For the second part of the question, refer to Export unit value index for the United Kingdom published in table 2.16 of ONS monthly publication Economic Trends. This data is supplied to us from the Department of Trade and Industry. For methodology for the derivation of the export unit value index, refer to Competitiveness in Manufactures article on page 43 of June 1997 edition of ONS publication Economic Trends. The Department of the Environment can give more detail on international comparisons.
Year Nominal rate of interest percentage per annum Real rate of interest percentage per annum 1970 7.25 1.25 1971 5.50 0.75 1972 6.00 1.00 1973 9.25 1.00 1974 12.25 0.75 1975 10.50 0.50 1976 11.00 0.75 1977 9.50 0.50 1978 9.50 1.00 1979 13.75 1.00 1980 15.50 1.00 1981 14.25 1.25 1982 11.25 1.25 1983 10.00 2.00 1984 10.00 2.25 1985 12.50 2.50 1986 11.00 3.00 1987 9.50 2.50 1988 9.00 2.00 1989 14.50 2.50 1990 14.00 1.75 1991 12.00 1.75 1992 9.25 2.00 1993 5.75 2.00 1994 5.75 2.50 1995 6.50 2.25 1996 6.00 2.00 The nominal rate of interest is an average over the year. The price index used is the rate of change in prices over the year.
All figures were rounded to the nearest 0.25 percentage point.