To ask the Chancellor of the Exchequer what United Kingdom bank base rates were in June 1983 and June 1987; and what they are now.
Mr. Norman Lamont
Bank base rates were reduced to 91 per cent. from 10 per cent. on 15 June 1983 and stood at 9 per cent. throughout June 1987. They now stand at 12 per cent.
I thank the Chancellor for that reply. Why does he keep insisting that Government economic policies are working when almost 3 million of our fellow citizens are not? Does he see any connection between the loss of 1,000 manufacturing jobs each day for the first 90 working days of this year and high interest rates? Will he acknowledge that electors were looking forward to a June election because it is only during election periods that the Government manage to get interest rates down?
Rising unemployment and the recession have been the price that we have had to pay to get inflation down. That price is well worth paying. I remind the hon. Gentleman that, under the previous Labour Government, inflation was never lower than 7·4 per cent. We shall have an average rate of inflation for the whole of this year lower than that.
Mr. Tim Smith
Contrary to the pessimistic forecasts of the anarcho-monetarists who wrote a letter to The Times a couple of months ago, is not it clear that Britain's membership of the exchange rate mechanism has been a great success, that it has led to exchange rate stability and lower interest rates and that there is every prospect that those will continue?
My hon. Friend is right. Only a few months ago, when we joined the exchange rate mechanism, people said that our only choice was to devalue and leave the ERM or we would be unable to cut interest rates. In fact, we have been able to cut interest rates by 3 per cent. That has been good news for business and it has also been extremely good news for mortgage holders. Since last October, the average mortgage payment has come down from £290 to £ 240 per month, saving the average mortgage payer £50 a month. First-time buyers are doing even better because of competition between the building societies.
Will the Chancellor confirm and afterwards perhaps explain why interest rates were 12 per cent. or more for 60 months between 1979 and 1991 whereas, starting with the Attlee Government in 1945 all the way through until 1979, they were higher than 12 per cent. for only 26 months? Under the Conservative Administration of the past 12 years, interest rates seemed to be lower than 12 per cent. only in 1983, in 1987 and now in 1991. Are not the temporary low interest rates a politically expedient, but economically inadvisable blip? As soon as the Government win the next election —they hope —they will raise interest rates again.
The hon. Gentleman is always telling us not to go back and make comparisons with the Labour Government, but now he seems to want us to go back all the way to the second world war, to a period when there was exchange control and control of bank lending. Interest rates all over the world were higher in the 1980s than they were in the 1940s, 1950s, 1960s or 1970s. That has not prevented Britain's economy from growing more rapidly in the 1980s than before, despite the fact that we have had relatively high interest rates.