Restrictions on Payment or Charging of Interest by Banks, etc.

Part of New Clause 3 – in the House of Commons at 12:00 am on 27th February 1973.

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Photo of Mr John Cronin Mr John Cronin , Loughborough 12:00 am, 27th February 1973

That is very helpful to know. But no doubt the Chief Secretary will deal with that point.

It is an obvious truism that the high interest rates which we are asking the Government to control will have a deplor- able effect on capital investment and on the building up of stocks and, therefore, will increase unemployment. We need not develop that point because both sides of the House are enormously and painfully aware of it. An important thing to remember is that these high rates are not having any effect on the property speculator, the pampered child of the Government. As things are going at present, it does not worry a property speculator if he pays even 15 per cent. interest. He knows that in a few months' time he will make 100 per cent. profits. Property speculators will not be affected.

This will affect everyone else, however, who makes a worthwhile contribution to the economy. Most important, of all, it will affect principally the small man. The large borrower, the man in big business, will be able to offset these high interest rates against his taxation. The man who pays a high rate of surtax, or large amounts of tax under the new tax code, will be very much less affected, whereas the smaller man, like the small businesses all of us know in our constituencies, will be much more severely affected by these interest rates which are now so high. Yet the Government have declined so far to take any action to control and to reduce these rates.

Perhaps the Chief Secretary will correct me if I am wrong, but I presume that the Government's reluctance to control interest rates is due to an intention to let them rise as high as possible to cut down the money supply. I do not know whether that is the intention, but I suggest that these high rates would not occur if the Government took some very sensible steps to reduce the inflation on borrowing. If the Chief Secretary could persuade his right hon. Friend the Chancellor of the Exchequer, in this time of national crisis, to take the very sensible step that was taken by my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) when Chancellor, and to ensure that in future the interest paid on borrowings could not be set against taxation as an expense, except in cases where that was particularly helpful in the national interest, that would bring down interest rates enormously. It would not then be necessary for us to demand that the right hon. Gentleman should have some effective form of control.

The other important thing is that there should be some quantitative control of interest rates. One of the maddest things that the Government did at the end of 1971 was to abolish all quantitative controls of interest rates and controls on hire purchase and to cease giving the banks any directions about who should receive loans and who should not. If we had quantitative controls, this would be much more help for the economy and these high interest rates would be unnecessary.

In conclusion, it is essential that the Government should have power to control these high interest rates. At the same time, however, such rates would not be necessary if the Government abandoned their crazy policy of subsidising a demand for credit and at the same time raising its price.