Below is the text of Mr Major’s Commons question regarding mortgage interest rates on 26th November 1979.
Mr. John Major (Huntingdonshire) I have listened to the debate with an element of growing astonishment, not only because of some of the arguments presented by the Opposition but also – if this is such a desperate and serious charge – the relative lack of fire in what they had to say. Notwithstanding the denials made by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) at the outset of the debate that the present situation was partly the responsibility of the previous Government, the course of this debate is the clearest possible evidence that the Opposition are well aware that their public borrowing legacy was a significant contributor to the present high level of interest rates and the rates that mortgagors have to pay.
No one – from my right hon. Friend the Secretary of State who opened the debate to my hon. Friend who will close it, and every other Member who has spoken – denies that the present level of the minimum lending rate is a disaster for the country and something that we all wish to avoid and hope to see reduced at the earliest opportunity. That is not the matter in dispute.
I am sorry that the right hon. Member for Sparkbrook is not present. To treat the House, as he did, to a recitation of what the newspapers thought rather than indicate the Opposition’s policy is not to give the debate the merit it deserves in the eyes of many whose mortgage and other borrowing interest rates are so high.
It is not a cause of dispute that mortgage interest rates are too high and that mortgagors will be hit. Although it has not been mentioned, the construction industry, which is so often the first casualty of high interest rates, may also be hit. That much is self-evident. We can all accept that that is so.
The hon. Member for Swansea, East (Mr. Anderson) mentioned high interest rates as an element of deliberate Government policy. That is, at best, a half truth. It is true that the Government are prepared to have high interest rates to contain the money supply, because we believe that that is an important component, though not the sum total, in the control of inflation, but it is untrue to say that for some masochistic, self-destructive reason the Government have artificially forced up the level of interest rates. That is absurdly untrue.
The hon. Member for Truro, (Mr. Penhaligon), whose party is so concerned about this matter that its members seem to have left the Chamber after making their contributions, listed the many sectors of the community that he claimed voted Conservative – I have no reason to disagree with him – that would be badly hit by a high level of interest rates. The hon. Gentleman is right. Many of the supporters of the Government who gave us such a clear majority at the last election will be affected by these rates. So it must surely be self-evident to everyone that the last thing that the Government would do as a deliberate act of policy would be to inflict a high interest rate unless it was for a purpose. That purpose, as we see it, is the control and reduction of future inflation. That is a policy that surely should be shared by all hon. Members.
We believe that we cannot achieve the containment of inflation, and with it the reduction of interest rates, without, first, a reduction of the public sector borrowing requirement and, secondly, control of the money supply. I believe that most Opposition Members will recognise that as being so, even if, at the moment, for understandable reasons, they are not inclined to admit it. The truth is that mortgage interest rates cannot be divorced either from other interest rates in our domestic economy or, as the hon. Member for Swansea, East stated, when he spoke rather well, from the general level of world interest rates.
Mr. Stuart Holland (Vauxhall) If the hon. Member for Huntingdonshire (Mr. Major) believes that we cannot insulate mortgage interest rates from interest rates in general, will he explain how in the United States, for example, over most of the post-war period, mortgage companies have effectively done that in relation to Federal Reserve finance and how, on the Continent, mortgage financing effectively operates insulated from the rest of the banking system?
Mr. Major That is a totally different system of finance, as the hon. Member for Vauxhall (Mr. Holland) is well aware. If he wishes to debate the American and British systems of financing housing, I should be delighted to do so, but not when there are five minutes or so left before the winding-up speeches begin.
A little earlier, Opposition Members charged that there was a measure of Government incompetence in relation to interest rates rising to their present level. There has been much rather sterile talk about “our interest rates never reached more than 15 per cent. and the Government have produced a minimum lending rate of 17 per cent.” If one considers the position in relation to the rest of the world one cannot, as has been said, isolate oneself from that. I believe that Opposition Members will agree with that.
At the time when the previous Government imposed a minimum lending rate of 15 per cent., the interest rates in New York were about 5 per cent. At present, when we have a minimum lending rate of 17 per cent., interest rates in New York are 15 per cent. or thereabouts. If relative incompetence is to be a charge on the present Government, they escape from that charge relatively unscathed.
A moment ago I mentioned the PSBR. That is an element of considerable concern in connection with our domestic levels of inflation and interest rates. Even after what the Opposition have charged as excessive cuts in public expenditure, the PSBR anticipated in the Budget was £.8¼ billion, and it is likely to be a little greater at the outturn of the year. The sheer difficulty of funding that amount is a material factor in connection with the level of interest rates. Surely that is something that the Opposition must recognise as partly attributable to the legacy that we inherited and one that we, in the short term, have been unable to do anything about. If, as I am sure they do, Opposition Members accept that we must contain inflation, they must also accept that we must seek to reduce the PSBR and consequently reduce, over a period of time, the general level of interest rates, not least in the interests of mortgagors.
I cannot understand how Opposition Members are able, at an early stage of this Parliament, to mount an attack in the terms of the motion without recognising their past contribution to the present situation. Whether Opposition Members like it or not, many owner-occupiers, or would-be owner-occupiers, not least in the council house sector, will see in the attitude of the Opposition a large measure of hypocrisy. Despite many Opposition Members opposing mortgage interest relief and other elements of policy that would lead to greater owner-occupation, they now bring this sort of motion before the House. I hope that the motion will be decisively defeated.