Interest Rates

Oral Answers to Questions — National Finance – in the House of Commons at 12:00 am on 8 July 1969.

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Photo of Mr John Fraser Mr John Fraser , Lambeth Norwood 12:00, 8 July 1969

asked the Chancellor of the Exchequer whether he will set up an inquiry into ways of insulating domestic interest rates from fluctuations in international interest rates.

Photo of Mr John Fraser Mr John Fraser , Lambeth Norwood

Would my right hon. Friend agree that rises in interest rates mean that the rich get richer and the poor get poorer and that most people who lend money at interest in this country have no intention of lending it ouside the country? It seems insane to them that changes in interest rates in New York should affect building society rates in this country. Will he look into the matter?

Photo of Mr Roy Jenkins Mr Roy Jenkins , Birmingham Stechford

I think that the relationship between interest rates and the distribution of income is probably somewhat more complex than my hon. Friend suggests, but I do not think that it would be possible to insulate ourselves from interest rates outside in the way he suggests.

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

asked the Chancellor of the Exchequer if he will make a statement on the current level of interest rates.

Photo of Mr Roy Jenkins Mr Roy Jenkins , Birmingham Stechford

The current level of interest rates in this country reflects the requirements of domestic economic and monetary policy as well as levels in financial centres overseas.

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

Is not the present level of interest rates alarming, particularly in view of the serious effect on investment decisions? Does not that stem from the United States monetary policy? Can my right hon. Friend say what discussions he is proposing to have with the United States with a view to seeing whether action can be taken to reduce the international level of interest rates?

Photo of Mr Roy Jenkins Mr Roy Jenkins , Birmingham Stechford

I keep in fairly close touch with the United States on these matters, as I do with other monetary authorities. I am not entirely convinced. This is a factor which could have an effect on investment decisions, but the fact -remains that with interest rates at what I think is a historically high level at present, investment plans are also at a very high level.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

Now that the Chancellor has gone on record as saying that the increase in interest rates is in part due to deliberate Government policy, will he take responsibility for the £2½ million extra which the G.L.C. is having to find, on account of which it has put up its rates today?

Photo of Mr Roy Jenkins Mr Roy Jenkins , Birmingham Stechford

No, Sir. For one thing, when local authorities borrow it is the case that they get substantial help from the Government in terms of interest rates. I also indicated that while probably the dominant factor is the level of international interest rates, two reasons why I cannot ignore this are the basic facts of the situation and that I believe it right to pursue a policy of credit stringency in this country.

Photo of Mr Iain Macleod Mr Iain Macleod , Enfield West

If the dominant factor is the international interest rates, how was it that in 1964 both the Leader and Deputy Leader of the Labour Party pretended that unilaterally they could bring down rates in this country?

Photo of Mr Roy Jenkins Mr Roy Jenkins , Birmingham Stechford

No. I think that they indicated that they could introduce something very near to the option mortgage scheme.

Photo of Sir Austen Albu Sir Austen Albu , Edmonton

In view of my right hon. Friend's estimates of investment and exports, are there indications that by the end of the year there will be spare capacity in the capital goods industries?

Photo of Mr Roy Jenkins Mr Roy Jenkins , Birmingham Stechford

It does not look as if there will be anything like approaching spare capacity in the capital goods industries. The indications are both that export orders are strong in this sector and that, with a fairly strong home investment demand, demand is stronger, as I would wish, in the capital goods sector than it is in the consumer goods sector.