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Interest Rates

Volume 13: debated on Thursday 19 November 1981

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Order. The hon. Gentleman is present, at least he is down here in the Chamber.

12.

asked the Chancellor of the Exchequer what has been the gap between bank rate and minimum lending rate and the average interest paid on premium savings bonds in 1960, 1970, 1980 and at the latest available date.

The gap between bank rates and MLR, and the value of the prize money as a percentage of the value of the total of premium savings bonds, was for the years specified 1·1, 2·6 and 9·9 respectively. The gap in August this year—when MLR was last posted—was 5·0.

Does not the hon. Gentleman feel that the Treasury contribution is too low? Is not this really a cheap money policy, which he is destined to oppose?

I am unaware of the significance of the hon. Gentleman's move from the Liberal Bench. However, the interest was raised on 1 July 1980. It must be borne in mind that premium savings bond prizes do not carry tax. Equally, it is fair to point out that as about £1,400 million is invested in these bonds, it must be a medium which the investor finds attractive despite the fact that the interest rate is lower than prevailing rates from the banks.

Is the Minister aware that there are occasions when people can make more money at gambling than by investing in premium bonds? When he is running short of money and the PSBR is extremely high, he might be advised to go to the Playboy Club, wait until the wheel stops spinning and chuck in the dice.

Many gamblers would be happy if they were guaranteed a 7 per cent. return on their investment.