Money Supply

HC Deb 06 December 1979 vol 975 cc602-3

13. Mr. Budgen

asked the Chancellor of the Exchequer if he will now publish the medium term targets for the money supply.

Sir Geoffrey Howe

As I said to the House on 8 November, I am currently considering whether there would be advantage in formulating more precisely our longer term monetary objectives, which I reaffirmed in my statement on 15 November.

Mr. Budgen

Does my right hon. and learned Friend agree that the great advantage of publishing these targets, at least in brackets, would be to make it plain to the whole nation that even if the Government wanted to execute a U-turn, once those targets had been published, they could not do so?

Sir G. Howe

I am glad to endorse the entirely hypothetical nature of my hon. Friend's question, as no such contemplation is in our mind. I agree with him that there are certainly powerful arguments to be advanced in favour of publishing targets in that way. I have not excluded those arguments from my consideration.

Mr. Horam

As the right hon. and learned Gentleman does not publish medium term targets for money supply and as he is apparently already reconsidering the public expenditure plans that we discussed only yesterday may I ask what has happened to the attempt to abandon the fine tuning of the economy?

Sir G. Howe

The hon. Gentleman must misunderstand the context in which the phrase "fine tuning" has developed. [Interruption.] The right hon. Member for Leeds, East (Mr. Healey) does not make his own comprehension of the position any better by laughing at it.

The case for considering monetary targets over a period of time, as suggested by my hon. Friend, is designed precisely to make less likely fine tuning of the kind that this Administration have, in any event, discarded.

Mr. Bruce-Gardyne

Does my right hon. and learned Friend agree that, whether or not we publish long-term monetary targets, the achievement of a gradual and steady contraction in the rate of growth in the money supply, without exorbitant interest rates, is dependent on a continuing, gradual decline, year by year, in the money size of the public sector borrowing requirement?

Sir G. Howe

I endorse my hon. Friend's restatement of the objective I set in my Budget speech, namely the reduction from year to year of the rate of growth of the money supply. I also endorse, within that, the objective of securing a reduction in the size of the public sector borrowing requirement. Whether that should follow the same smooth and steady downward path as the reduction of the money supply is a matter for consideration.