Below is the text of Mr Major's response on Interest Rates on 6th July 1989 in the House of Commons.
Ms. Quin To ask the Chancellor of the Exchequer what representations he has received from small businesses on the current level of interest rates.
Mr. Major My right hon. Friend has received a number of representations on this subject.
Ms. Quin Have the Government studied the recent survey by the Forum of Private Business, which shows that small firms are rapidly becoming the victims of high interest rate policies? Are the Government aware of the CBI's industrial survey showing the weakness of small firms' export orders? What advice are the Government now giving to small firms?
Mr. Major I have seen those reports. There is no doubt that interest rates are uncomfortable. But inflation would be more uncomfortable, would last longer and would be far more damaging. Monetary policy is specifically geared to bear down on inflation and so bring it down. That is in the interests of all business, particularly small business.
Mr. Gow Is it not the case that excessive monetary growth caused, and diminished monetary growth will cure, the monetary evil of inflation? Will my right hon. Friend confirm that he will maintain interest rates at such a level as to persevere in the abatement of inflation until we achieve his declared target of stable prices?
Mr. Major I can certainly assure my hon. Friend that we have no intention of relaxing on monetary policy until it begins to bear fruit.
Mr. Haynes When the Prime Minister comes in to the Chamber in a moment or two, will Treasury Ministers have a word with her and tell her to get rid of the Chancellor and farm him off back to the beautiful green fields of Blaby, because he has been a complete failure? He promised that the Government would help small businesses because that was where the jobs would come from and said that that would sort out the problems of the economy.
Mr. Major I disagree with what I could hear of what the hon. Gentleman said. We cherish the Chancellor and hope to keep him for a long time.
Mr. Bellingham Is the Chief Secretary aware that in west Norfolk unemployment has come down from a peak of 18 per cent. to less than 6 per cent.? The main reason for that is the success of the small firms sector, which has prospered under the Chancellor's policies. However, is my right hon. Friend aware that that sector is worried about the increase in inflation and supports policies that will bring inflation down?
Mr. Major I entirely agree. Unemployment has fallen in each and every region of the United Kingdom -
Mr. Chris Smith Is the Chief Secretary aware that bankruptcies among self-
Mr. Major The hon. Gentleman can rattle his chains all he likes, but the creation of new businesses is now running at an unprecedented rate of 1,300 new businesses every week. The hon. Gentleman can never tell us when that happened under any Labour Government.
Mr. Oppenheim Does my right hon. Friend agree that the effect of high interest rates on business is substantially mitigated because long-
Mr. Major That is right. It is also pertinent that the profitability of small businesses is at the highest level for 20 years. That means that firms are much less reliant on borrowing and therefore much less sensitive to short-