Below is the text of Mr Major’s response on Consumer Credit, made on 26th January 1989 in the House of Commons.
Mr. Beith To ask the Chancellor of the Exchequer what estimate he has made of the impact of his interest rate policy on consumer credit.
Mr. Major By increasing the cost of credit, rises in interest rates exert downward pressure on the growth of consumer credit.
Mr. Beith Are Treasury Ministers sufficiently confident of the success of their policies to tell us that they will not need to raise interest rates further? Have they looked at the indices that they now use to argue that they have got control of the situation? Last year, those indices were showing even more clearly that there would not be a credit boom. If Ministers believed them then, that may be the explanation for what went wrong with the Budget strategy. Will Treasury Ministers consider alternative measures that are available to broaden the attack on inflation without going to the credit control measures favoured by the right hon. and learned Member for Monklands, East (Mr. Smith), whose return we so much welcome?
Mr. Major No Minister can give the hon. Gentleman the firm assertion which he asked for at the beginning of his question. The problem at the moment is excess demand. The way to control the growth of credit is to increase its cost. That is what we have done. We are confident that it can and will work.
Mr. Neil Hamilton Will my right hon. Friend remind the House that last spring Opposition Members were calling for even faster reductions in interest rates which would have fuelled the consumer boom even more? Now they are claiming the benefit of hindsight and they say that we were moving too fast. Their economic policy does not add up.
Mr. Major I certainly recall that. I also recall that Opposition Members were asking for more public spending both last autumn and earlier this year. That would not have helped, either.