HC Deb 11 December 1980 vol 995 cc1063-4
13. Mr. Knox

asked the Chancellor of the Exchequer what is the underlying rate of growth of sterling M3 since the beginning of the present target period.

Sir Geoffrey Howe

Sterling M3 grew by about 17 per cent. between February and November. After allowing for corset distortions, this is probably equivalent to an underlying annual rate of about 20 per cent.

Mr. Knox

Will my right hon. and learned Friend confirm that he does not expect a similar percentage inflation rate at some time in 18 to 30 months from now? If so, does that not cast some doubt on the theory of monetarism?

Sir Geoffrey Howe

One has to have regard to monetary growth over a long period. The prospects are for a slower rate of monetary growth for the remainder of the financial year. Bank lending is showing signs of deceleration. The borrowing requirement, particularly in the new year, will be running at a lower rate, and the new index-linked savings certificates will yield substantial sums to fund the borrowing requirement. Those factors will make changes that will avoid the consequences suggested by my hon. Friend.

Mr. Richard Wainwright

Is the right hon. and learned Gentleman aware that the figures for the growth of money supply and public borrowing and the share of taxation are so contrary to his published financial strategy as to destroy its credibility? In order to assist business planning, will he replace the discredited strategy with a revised version?

Sir Geoffrey Howe

The figures underline the importance of pursuing the thrust of that strategy. It is crucial to achieve effective control of the size of the borrowing requirement if interest rates are also to be controlled. I shall welcome the hon. Gentleman's support in pursuing that strategy.

Mr. Jessel

Is my right hon. and learned Friend aware that most of my constituents comprise one of the most intelligent communities in the country? Most of them think of M3 as the name of a motorway. Is he further aware that they are very pleased by the falling rate of price increases and the fact that there are fewer strikes?

Sir Geoffrey Howe

I am delighted to join my hon. Friend in paying tribute to the supreme wisdom of his constituents and endorsing their wisdom in that respect. Price inflation is coming down and is likely to continue to fall. We are facing the lowest level of industrial disputes for 30 years, and realism and common sense are spreading widely throughout British industry.

Mr. Shore

The Chancellor's reply of 20 per cent. is, the House recognises, a matter of obvious embarrassment to him. May I ask him, however, to be neither heartened nor depressed by the movements of the money supply? May I ask him once again to turn his attention away from what is now generally accepted as an exploded obsession to the real economy, to the level of unemployment and to the actual measures of output of the economy?

Sir Geoffrey Howe

The real economy is no less important than monetary statistics, and in the real economy we see inflation falling, interest rates recently reduced and wage bargaining at a much more sensible level. It is now crucial to achieve the same moderation in pay settlements in the public sector in order to diminish that burden on the trading economy.