§ 4. Mr. Bruce-Gardyne
asked the Chancellor of the Exchequer what is his latest forecast of the precentage increase in the money supply during the financial year 1970–71.
§ The Chancellor of the Exchequer (Mr. Anthony Barber)
In the first three quarters of the financial year 1970–71 the money supply increased at an average rate of 3 per cent. a quarter. Figures for the last quarter of the financial year are not yet available.
§ Mr. Bruce-Gardyne
May we then look forward to the current financial year? If, on the gloomiest possible hypothesis, the rate of inflation was such that the achievement of the 3 per cent. growth objective which my right hon. Friend laid down in his Budget speech were no longer compatible with the limitation in the rate of increase of the money supply to 3 per cent. per quarter or less, would it be the growth objective or the monetary guidelines which would have the priority?
§ Mr. Barber
The question refers specifically to the year 1970–71. There are a number of factors to be taken into account. The growth over the year is certainly one relevant factor, but another is bound to be the current rate of inflation, and another is the state of company liquidity and the Government's determination to reduce the current rate of inflation. All these factors have to be taken into account. This is why I said in the Budget speech that it was important that we should consider this matter flexibly.
§ Mr. Merlyn Rees
Will the recent increases in personal loan schemes by the banks upset the Budget judgment on money supply?
§ 7. Dr. Gilbert
asked the Chancellor of the Exchequer what proposals he has for redefining the elements that enter his calculations of the size of the country's money supply.
§ Dr. Gilbert
I hope the hon. Gentleman will realise that that will come as 211 a considerable disappointment to the House. But, going beyond that question, has he anything to add to his right hon. Friend's answer to the hon. Member for South Angus (Mr. Bruce-Gardyne)? All the considerations involved having been enunciated, could we have some indication—there is confusion even in the responsible newspapers about the Government's intentions here—whether the Government intend to use the control of money supply to damp down cost inflation, regardless of its effects on the gross national product?
§ Mr. Higgins
I see no reason why the hon. Gentleman should be disappointed at my original answer. The question of the definition of the money supply was reviewed in the summer last year, and the new definitions have proved useful. The second question is a different question, and it previously received a different answer.