HC Deb 24 October 1972 vol 843 cc968-70
6. Mr. Bruce-Gardyne

asked the Chancellor of the Exchequer what was the annual rate of increase in money supply (M3) in the latest period of three months for which figures are available; and whether the rate of increase since his Budget statement has been in conformity with the policy therein outlined.

The Chief Secretary to the Treasury (Mr. Patrick Jenkin)

The annual rate of increase in the wide definition of money stock (M3) in the three months to mid-September was about 22 per cent., and the rise in the narrow definition (M1) was 4 per cent.—again at an annual rate. These rates of growth are slower than in the earlier part of the financial year when, as my right hon. Friend told the House on 29th June, the growth of money and credit was faster than appropriate to our objectives for the growth of the economy. This slowing down reflects the steps we have taken to moderate the rate of growth of money supply.

Mr. Bruce-Gardyne

It is indeed welcome that there should have been some slowing down, but does not my hon. Friend agree that the rate of increase in the money stock is still horrific? Furthermore, would he care to comment on the remark of the Governor of the Bank of England last week that there was no monetary policy which would at the same time stimulate growth and restrain inflation? Would he tell the House to which direction our monetary policy now inclines?

Mr. Jenkin

My right hon. Friend has made it abundantly clear on many occasions in the House and elsewhere that his stance on money supply has been to make sure that in no sense would there be any restriction on the rate of growth of the economy through any tightening of the money supply. At the same time, he has made it equally clear that if the money supply is allowed to increase too fast, that could lead to inflationary pressures. When I tell my hon. Friend that the M3 figures in the three months April to June showed a rate of increase of 8 per cent., whereas in the three months to September it was only 5 per cent., he will agree that we can say that we have made considerable progress.

Sir Robin Turton

Is not my hon Friend also concerned with the figures for the increase in personal liquidity, now standing at more than £33,000 million, more than the national income and in effect having the inflationary tendency to raise prices, particularly of land?

Mr. Jenkin

I think that it is now recognised that the rate of increase in the money supply in the early part of the year undoubtedly had an effect on the increase in the value of land and houses. I am sure that my right hon. Friend will recollect the directive given to the banks by the Governor at the beginning of August saying that they should exercise restraint in that form of lending.