Interest Rates

Oral Answers to Questions — National Finance – in the House of Commons at 12:00 am on 18th April 1991.

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Photo of Margaret Ewing Margaret Ewing , Moray 12:00 am, 18th April 1991

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

Photo of Alex Salmond Alex Salmond Leader, Scottish National Party

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

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

Bank base rates are 12 per cent.

Photo of Margaret Ewing Margaret Ewing , Moray

Will the Chancellor consider undertaking a comprehensive analysis of the number of small businesses and their employees who have fallen victim to the Government's high interest rate policy? Because of the importance of small businesses to the Scottish economy and to the rural economy in general, will he ensure that interest rates are taken into consideration combined with the importance of the business rate, which in Scotland runs at 58p in the pound as opposed to 38·5p in the pound in England?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

Insolvencies in 1990 were under 1½ per cent. of the total stock of businesses. That should be kept in context, because there has been a dramatic rise in the number of new businesses formed in recent years. What really matters to businesses is getting inflation down. It is clear from the figures that the Government's strategy against inflation is succeeding month by month. We must not let up because it is most important for businesses.

Photo of Alex Salmond Alex Salmond Leader, Scottish National Party

The people will have noted the Chancellor's view that the economic damage suffered because of high interest rates has been so slight. Is not the truth that the damage has been not only severe, but wholly futile, because the Scottish economy has been dragged into an unnecessary recession by an interest rate policy designed for the economic conditions of the south-east of England? Whatever combination of the Chancellor's predecessors he chooses to blame, what responsibility will he accept for the economic blunders of the past few years?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

The hon. Gentleman will recall that my right hon. and learned Friend the Chief Secretary to the Treasury drew attention to how well the Scottish economy has withstood the recession that has affected the rest of the country. As I said to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), there is no gain for business in policies designed to accommodate inflation which is what the hon. Gentleman appears to want. He talks about the recession here as though there were not also a recession in the United States, in Canada and in several other countries.

Photo of Mr Giles Shaw Mr Giles Shaw , Pudsey

I welcome my right hon. Friend's comments on interest rate policy, but does he agree that businesses are anxious to know that the progressive nature of the half percentage cuts month by month is also part of that policy? Will he comment on the extent to which we shall be able to maintain such a policy for the United Kingdom and not have it deflected by European requirements?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

My hon. Friend will understand that I cannot anticipate or reveal the future trend of interest rates as I see it. I have made it clear that further reductions in interest rates must depend on progress month by month against inflation. Business and the House very much welcome the fact that, far from our being boxed in by membership of the exchange rate mechanism, we have reduced interest rates by three points since we joined the ERM and by two points since December.

Photo of Mr Hugh Dykes Mr Hugh Dykes , Harrow East

Does my right hon. Friend agree that as the pound in the ERM has behaved so well and successfully, and as the Treasury target of 4 per cent. inflation by the end of the year is well set to be reached, there is scope for further interest rate reductions in due course?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

I hope that my hon. Friend will understand if I do not reply further to the point that I made to my hon. Friend the Member for Pudsey (Sir G. Shaw).