HC Deb 07 August 1975 vol 897 cc702-3
6. Mr. Ridley

asked the Chancellor of the Exchequer what rate of growth of the money supply would be consistent with a rate of annual inflation of 10 per cent.

The Paymaster-General (Mr. Emund Dell)

No clear relationship has been established to link a particular rate of growth of the money supply with a particular rate of inflation, but in broad terms, there is little risk of monetary factors stimulating inflation if the growth of the money supply, M3, is kept well within the rate of growth of money GDP.

Mr. Ridley

Is the right hon. Gentleman aware that the indications are that the money supply is now well above the level which will be necessary to achieve the aim of the Chancellor of the Exchequer, of a 10 per cent. rate of inflation at the end of next year? Therefore, will he look carefully into what is to happen after the present recession is past? The indications are that we may be having Latin American rates of inflation unless he keeps a severe eye on this matter.

Mr. Dell

I do not accept what the hon. Gentleman says. My right hon. Friend has succeeded in getting down the rate of growth of M3 compared with what it was under the previous Government. M3 is the relevant indicator here. The hon. Gentleman can be sure that we shall continue to regard it as important to keep the money supply under control.

Mr. Alexander Fletcher

As a contribution to reducing expenditure, what would be the saving in public expenditure if the Government abandoned their proposal to purchase 51 per cent. of North Sea oil?

Mr. Dell

I do not think that that arises out of this Question. The hon. Gentleman has asked that question on many occasions. All that I can tell him is that the figures offered by the Opposition are, fortunately, a gross exaggeration.

Mr. Alexander Fletcher

On the Government's figures.