§ Mr. Gouldasked the Chancellor of the Exchequer (1) what is his estimate of the cost to consumers of the increase in mortgage rates recently announced compared to the increase in the cost of food which would result from the devaluation of the £ sterling from $1.66 to $1.50, assuming no devaluation of the green pound;
(2) what is his estimate of the cost to consumers of all the measures taken since the Budget to restrict the money supply; and how this compares with the estimated effect of a devaluation in the £ sterling from $1.66 to $1.50, assuming no devaluation of the green pound.
§ Mr. Denzil DaviesMeasures taken since the Budget are likely to affect consumers in two main areas: (i) the increase in employers' national insurance contributions announced in July, which will eventually add about 1 per cent. to consumer prices; (ii) the increase in the mortgage rate associated with the recent increase in the minimum lending rate, which is estimated to add about ½ per cent. to the retail prices index.
It is estimated that a 10 per cent. fall in the value of the pound sterling against a weighted average of other convertible currencies without a corresponding green pound depreciation would in due course result in an increase of rather more than 2 per cent. in retail prices.
Because the effect of the assumed depreciation on food prices would depend on changes in the sterling value of a number of other currencies apart from the dollar—i.e., on the precise pattern of all the relevant exchange rates after the 519W depreciation—it is not possible to answer my hon. Friend's Question on this point.