HC Deb 06 November 1980 vol 991 cc1456-7
18. Mr. Budgen

asked the Chancellor of the Exchequer what was the percentage increase in the money supply as monitored by the M3 in the year ended 1 September.

19. Mr. Race

asked the Chancellor of the Exchequer what are the latest figures for the annual rate of growth of M3 money supply in the financial year 1980–81.

24. Mr. Chapman

asked the Chancellor of the Exchequer what was the movement in the official measure of the money supply in the last three months for which figures are available.

Mr. Lawson

As my right hon. and learned Friend the Chancellor said to the Treasury and Civil service Select Committee last week, we estimate that underlying sterling M3 has grown at around 19 per cent. at an annual rate since the beginning of the target period. The provisional October figures suggest that this rapid growth has continued, but we firmly expect the rate of growth to slow down appreciably in the second half of the year.

Mr. Budgen

Does that mean that, at some time between 18 months and 2½ years from the present, the rate of inflation will be about 19 per cent?

Mr. Lawson

What it does mean is that, if we do not succeed in getting a deceleration of the money supply, the outlook for inflation will be dangerous and alarming. As the right hon. Member for Leeds, East (Mr. Healey), who was a distinguished monetarist Chancellor in his day, pointed out in his Budget Statement in 1978: the rate of growth of the money supply is bound to fluctuate significantly from month to month."—[Official Report, 11 April 1978; Vol. 947, c. 1192.]

Mr. Race

Is it not clear that the underlying growth of M3 money supply, which has just been reported to the House, is an absolute disaster, and that, on the Government's own estimates, must mean that inflation next year will be running at very nearly 20 per cent? What kind of policies will the Chancellor introduce to brine down that rate of inflation? How many more public sector workers will be sacked by his Government and how many more pay settlements will be made in single figures?

Mr. Lawson

I am very glad to have the hon. Gentleman's support in our determination to bring down the rate of growth of the money supply.

Mr. Maclennan

In view of what the Chief Secretary describes as the imprecision in the relationship between the growth in the monetary aggregates and the fall in inflation, will not the Government henceforth rely on what is quite precise, namely, the damage being done to British industry by interest rates that are penal and crippling?

Mr. Lawson

The imprecision is not new. It has always been there. It did not deter the right hon. Member for Leeds, East (Mr. Healey) from paying great attention to the money supply when he was Chancellor. Nor will it in any way deter us.