HC Deb 22 March 1979 vol 964 cc1682-4
13. Mr. Watkinson

asked the Chancellor of the Exchequer if he remains satisfied with the workings of the gilt edged security market.

Mr. Healey

The gilt edged market has made possible net sales of Government stock outside the banking system totalling nearly £21 billion in the period from April 1974 to December 1978. This enormous capacity has been vital to the maintenance of the public services during a very difficult period. However, the Government are always looking for ways of improving the functioning of the market The announcement last week of a minimum rather than fixed subscription price for today's issue of 12¼ per cent. Exchequer 1999 should help to avoid the difficulties that arose on 22 February when there was a substantial unforeseen change in market sentiment between the announcement of new issues and the due date for subscriptions.

Mr. Watkinson

Does my right hon. Friend agree that there is something deeply offensive about the vast and easy profits made on the gilt edged market in recent weeks? Does he also agree that the market was able to force a dangerous and unwarranted rise in interest rates, and can he say whether the new tender issue has proven a means whereby speculators can be killed off and interest rates can be kept down?

Mr. Healey

As I told the House, we have introduced a modified tender system for the current issue which will avoid the difficulties that arose on 22 February. I am glad to say that there have been very heavy applications for that stock today, but it has not been oversubscribed, and therefore the problems that arose on 22 February and the means of meeting them have not turned out to be relevant.

Mr. Brooke

Does the right hon. Gentleman agree that recent disorders in the market owe more to the umpire and the linesmen than to the players on the field?

Mr. Healey

There is a blinding light on the pitch tonight all right. A lot of the disorder in the market recently, and particularly the fall in the financial markets and gilt edged prices yesterday, was due to a rumour, which I trust to be totally without foundation, that there might in the near futuure be a general election which would put the Conservative Party into power.

Mr. Ashley

How does the Chancellor of the Exchequer square the answer that he gave to my hon. Friend the Member for Gloucestershire, West (Mr. Watkinson) about relatively easy profits with the answer that he gave to my hon. Friend the Member for Rossendale (Mr. Noble) who asked for a household allowance, and the rejection of that allowance by the Treasury? How does he reconcile the two?

Mr. Healey

I say to my hon. Friend what I have said to all hon. Members. I take careful note of the views they have put to me about action in the current Budget. I would be in serious danger if I were to indicate any action which might follow from the very careful consideration which I give.

Mr. Peter Rees

While appreciating the candour of the Chancellor's initial answer to his hon. Friend, may I take him back to an answer given by his right hon. Friend the Financial Secretary? Will the Chancellor state explicitly that there will be monetary compensation for those holding Government paper who are unable to withdraw their capital or their interest on the due dates?

Mr. Healey

We shall accept responsibility for the interest in this case.