§ 13. Mr. Greenasked the Chancellor of the Exchequer whether the 75 per cent. Treasury guarantee on borrowings abroad by public authorities is still in force.
§ Mr. HigginsIf my hon. Friend is referring to the special arrangements for forward exchange cover established in 1969 (which apply to 100 per cent. of such borrowing), the answer is yes.
§ Mr. GreenDoes my hon. Friend appreciate that if the figure is 100 per cent. and not 75 per cent., it simply underlines the importance of this Question? Does he further appreciate that to borrow abroad in order to invest abroad is one thing, but to borrow abroad in order to spend at home is quite another? The former does not increase money supply; the latter inevitably must.
§ Mr. HigginsI agree with the first part of my hon. Friend's supplementary question. Clearly, a 100 per cent. scheme is more comprehensive than one involving a figure of only 75 per cent. There is certainly a difference between borrowing abroad to finance overseas investment and borrowing abroad to finance investment in this country. Nonetheless, the scheme gives a useful incentive to borrow abroad; this produces a useful inflow of 217 medium and long-term foreign exchange because the borrowing is for five years. This is consistent with general exchange control policy for domestic use which has operated since last January.
§ Mr. Bruce-GardyneI hope that my hon. Friend will carefully consider the implications of the last part of his supplementary answer. Surely today the circumstances are totally different from the circumstances which prevailed when the last Government introduced these methods to stimulate overseas borrowing. The last thing we want at the moment is to add to the inflow of funds, which is already causing sufficient embarrassment.
§ Mr. HigginsThat raises much broader questions of monetary policy, but, obviously, we keep the situation under review as circumstances change and would take fully into account the significance of recent events.