HC Deb 08 July 1969 vol 786 cc1132-4
2. Mr. Sheldon

asked the Chancellor of the Exchequer if he will make a statement on the present policy of the Government on the supply of money.

The Chancellor of the Exchequer (Mr. Roy Jenkins)

I have nothing to add to what I said in my Budget speech and in the debate on the Letter of Intent.

Mr. Sheldon

Is my right hon. Friend aware that the article in Economic Trends is a very inadequate picture on which to base fundamental economic change, and that the D.C.E., as explained in that article, represents only one small part of the domestic credit expansion? Will he further recall that it was shown by the answer to a Question which I put to him that there are several hundred million pounds which ought to be part of domestic credit expansion and which are not part of it? Will he, therefore, consider reviewing the whole basis, because it seems to be tending towards an economic joke designed only to humour the I.M.F.?

Mr. Jenkins

I do not agree with that. I would not agree that any of these concepts is wholly satisfactory, but I think that the D.C.E. is probably the best measurement that we are able to get of domestic credit expansion, or of the money supply, without it being affected by the quirks of what happens in our overseas account.

Sir G. Nabarro

As his target for aggregation of bank lending has now been achieved, and the total of hire-purchase debt is evidently stabilised, will the Chancellor now confirm that he has no further predatory intentions in regard to money supply?

Mr. Jenkins

The hon. Gentleman very much likes five-syllable words, and I do not quite understand what he means by "aggregation" in this context. Does he mean the level of bank lending?

Sir G. Nabarro

The total.

Mr. Jenkins

If he means the total, it has not been achieved; it is at present about 1 per cent. over.

Mr. Barnett

Has the Chancellor calculated the effect on unemployment, investment and growth of every £100 million which he takes out of domestic credit expansion, and how long it takes to become effective? If the answer is "Don't know", is not that all the more reason why he should be extremely cautious in his use of domestic credit expansion?

Mr. Jenkins

No, because I think that this moves in the right direction. I do not believe that absolute precision is given to any of these matters.

Mr. Alison

Does the Chancellor expect that the Government this year will be a net purchaser of gilt-edged from the non-bank private sector?

Mr. Jenkins

There would be no purpose in my making a forecast of that. I indicated our policy on gilt-edged in the debate on the Letter of Intent, and I have nothing to add to that.

Mr. Patrick Jenkin

Are there any studies which show that there is a direct relationship in this country, as opposed to America, between the growth of the money supply and the pattern of inflation, unemployment and the growth of the national product?

Mr. Jenkins

The article published in Economic Trends, which I am sure that the hon. Gentleman has read, stated that this gave us an up-to-date indication, nothing more than an indication, of what was happening in the economy on most of those fronts.