HC Deb 19 July 1979 vol 970 cc1971-2
7. Mr. Richard Wainwright

asked the Chancellor of the Exchequer what is his estimate of the current rate of growth of the M3 money supply.

Sir Geoffrey Howe

In the eight months to mid-June, sterling M3 grew at an annual rate of 13.3 per cent.

Mr. Wainwright

In view of the disappointingly slow progress towards the target of money supply that he announced in the Budget, will the Chancellor explain whether he is now abandoning a policy that could not reach accomplishment without killing off large sections of British industry?

Sir G. Howe

The hon. Gentleman totally misunderstands the position. In respect of money supply growth, the Government inherited a situation that was badly off course, and was getting more so. When we came into office the money supply growth rate was well above the top limit of the 8 to 12 per cent. range set by the previous Government, and the action taken in the Budget, including the increase in minimum lending rate, cannot be expected to have had an effect on that yet.

Mr. Denzil Davies

Does the Chancellor agree with the statement last night by one of the senior managing directors of the Union Discount Company, that to bring the money supply back within the targets interest rates will have to go higher before the end of the year?

Sir G. Howe

I should not like to accept that proposition. What I have no doubt about is that to overcome the explosive rate of growth of the money supply that we inherited it has been necessary for the Government to introduce firm monetary policies, including an increase in minimum lending rate, and it remains necessary for us to adhere to that. I hope that it will not be necessary to go beyond that. I cannot emphasise too strongly that these measures are an inevitable response to that part of the inheritance that we received.