§ Mr. Roperasked the Chancellor of the Exchequer what are the Treasury's obligations when fixing the rates of interest on loans from the National Loans Fund.
§ Mr. Denzil DaviesSection 5 of the National Loans Act 1968 requires the Treasury to be satisfied that the rates of interest on loans from the National Loans Fund are not less than would represent the cost to the Treasury if it were to borrow for a comparable period. The Treasury is required to increase the rates on such loans at the earliest convenient date when increases in market rates mean that this condition is no longer being met.
In order to avoid the administrative inconvenience and costs which too frequent changes of rates would involve for both the Government and the borrowers, it has been the normal practice only to change rates when one or more of them needs to be adjusted by at least one quarter per cent. and to allow a period of at least two weeks between changes in rates. There are, however, occasions when the timing and extent of the change in market conditions are such that the Treasury is bound to raise the rates after a shorter interval. The rates were so changed on 1st May 1976 to reflect the significant changes in the market following the increase in minimum lending rate announced on 23rd April.