§ A fiscal stimulus of this size will be fully consistent with maintaining the improvement in financial markets. In order to keep firm control of any inflationary pressures, I intend that domestic credit expansion in the coming year should be safely within the limit of £7.7 billion I set in December. The accompanying rate of growth of sterling M3 will depend on a number of factors, particularly the scale of the improvement in the balance of payments, since a surplus has the effect of expanding money supply. Although we expect a much better balance of payments next year, my best estimate is that the growth of sterling M3 will be in the range of 9 per cent. to 13 per cent.—the same as the estimate I gave in December for 1976–77.
§ In order to maintain this degree of control over the monetary aggregates, I intend that we should again finance a major part of the PSBR outside the banking system. I have already made a start with last week's gilt stock. It will also be prudent to maintain for the time being the present range of credit controls, and to operate them flexibly.
§ I am satisfied that on present trends these controls will allow sufficient room for industry's essential needs. The Government continue to regard the provision of adequate finance for industry as a key part of the industrial strategy, and I welcome the priority which the Wilson Committee on the Functioning of the Financial Institutions is giving to it.