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Interest Rates

Volume 405: debated on Tuesday 20 May 2003

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To ask the Chancellor of the Exchequer what his estimate is of the annual savings to the Exchequer which would result from lower debt interest costs if United Kingdom interest rates were (a) 0.5 per cent. (b) 0.75 per cent., (c) 1 per cent., (d) 2 per cent. and (e) 3 per cent. lower across the yield curve for 2003–04. [114652]

Reductions in yields across the yield curve will not affect the cost of servicing debt that has been issued at fixed rates, but will affect interest payments made on new debt that is issued and on variable interest rate debt. The following table sets out the estimated debt interest savings that would arise from changes to interest rates:

Fall in interest rates across the yield curve in 2003–04Estimated savings in debt interest in 2003–04 (£billion)
0.5 per cent.0.4
0.75 per cent.0.6
1 per cent.0.8
2 per cent.1.6
3 per cent.2.4