HC Deb 21 June 1979 vol 968 cc1485-6
7. Mr. Bruce-Gardyne

asked the Chancellor of the Exchequer what was the annualised rate of growth in the money supply, according to the M1 and M3 definitions respectively, in the latest period of three months for which the figures are available; and whether this was in accord with the monetary policy of Her Majesty's Government.

Mr. Lawson

In the three months to mid-May, M1 grew at an annual rate of 12.9 per cent. and £M3 grew at an annual rate of 7.9 per cent. However, in the last six months £M3 had grown at an annual rate of nearly 14 per cent., which was above the upper end of the target range of the previous Government, and there were signs that the rate of growth was increasing. My right hon. and learned Friend accordingly raised MLR to 14 per cent. in order to help bring the rate of growth of £M3 into line with the new target range which has already been referred to of an annual rate of 7 per cent. 11 per cent. for the next 10 months.

Mr. Bruce-Gardyne

Is it not painfully apparent that the reins of monetary control had slipped from the palsied hands of the right hon. Member for Leeds, East (Mr. Healey)? May I congratulate my right hon. and hon. Friends on vigorously recovering them? Can my hon. Friend assure the House that his right hon. and learned Friend will not be dissuaded by any recidivist neo-Keynesians in Great George Street from his professed intention of publishing rather longer-term objectives for money supply, going on into the next financial year?

Mr. Lawson

I am sure that my right hon. and learned Friend is well able to look after himself when it comes to dealing with recidivist neo-Keynesians or any one else. The issue of publishing longer-term monetary forecasts raises complicated matters. This point is under review and the idea has not been ruled out.

Mr. Denzil Davies

Since it has been suggested that there has been a certain amount of double counting in the PSBR forecasts and since we have been told that the money supply is now running at 14 per cent., may I ask whether the hon. Gentleman is satisfied that interest rates will not have to go higher to bring the money supply down to the target of 9 per cent. announced by the Chancellor?

Mr. Lawson

My right hon. and learned Friend has pointed out already the unwisdom of making forecasts of the interest rates. The previous Chancellor did this and was proved wrong time after time. We do not intend that to happen. If the right hon. Gentleman is worried about the public sector borrowing requirement and possible double counting—I assure him that there is none—let him look at the public sector financial deficit. He will find there that, as a proportion of GDP, it is projected this year to be at its lowest level for seven years—lower than at any time under the previous Administration.

Mr. Healey

Is the hon. Gentleman rebuking the Governor of the Bank of England for suggesting in his speech to the Leasing Association two days ago that MLR will have to stay at 14 per cent. throughout the summer?

Mr. Lawson

No. I was making no comment on the Governor of the Bank of England whatsoever.