§ I ought also to mention changes which have been made over the past year in the techniques of monetary control. From last August, minimum lending rate ceased to be posted. The main purpose of this change was to allow market forces a greater influence on the structure of interest rates, and to allow rates to be adjusted more promptly in response to changing economic conditions. These objectives have been met. The new arrangements have coped successfully with some severe swings both in the international markets and in the money markets here at home.
§ We have also been working to even out the flow of revenue over the year in order to ease the problems for money market operations and monetary control generally. Let me give three examples. Over the past nine months, Customs and Excise has taken steps, with the agreement of the companies concerned, to secure a more even monthly flow of VAT into the Exchequer by adjusting the quarterly dates on which certain traders are required to account for VAT. Secondly, we are seeking a smoother payment of the building societies' composite rate tax. Finally, and most important, the proposals for oil taxation, which I shall describe later, will spread the payment of petroleum revenue tax more evenly over the year.
§ A central element in the Government's financial policy is that the gap between public sector spending and revenue should be financed in a way that is consistent with our monetary target. We have therefore greatly improved the balance of Government funding.
§ In 1979–80, when the PSBR was similar to this year's, sales of gilt-edged stock were more than eight times larger than the contribution from national savings. This year the ratio was down to about two to one. National savings have exceeded their target, which was raised to £3½ billion last autumn. I congratulate the department on achieving these higher inflows through increased efficiency, while making its contribution to Civil Service staff reductions.
§ Interest rates have come down since the current national savings certificate was introduced. It will therefore be withdrawn from tomorrow and replaced as soon as possible by a new savings certificate offering a lower but still competitive rate of return.
§ New sales of gilts to the public in the past year have not needed to be more than about £7½ billion, with less emphasis on conventional long-dated high-coupon stocks In our funding policy we have demonstrated our confidence in our policies for reducing inflation. Last year I announced, as one part of our policy of diversified funding, the introduction of indexed gilt-edged stock. Over the past year, sales of this indexed stock amounted to some £2½ billion.
§ The right to buy this indexed gilt was restricted to pension funds and certain other institutions in respect of their United Kingdom pension business. I have now decided to remove this restriction. The Bank of England is announcing this afternoon a new issue of indexed stock on an unrestricted basis.
§ The restrictions on the existing indexed gilts already in the market will also be removed today. The House may recall that the original prospectus for these stocks itself provided for the possibility of removing the restrictions. This broadening of the market should increase the usefulness of indexed gilts as a funding instrument.
735§ Our policy of diversified funding will continue next year, with contributions coming from indexed gifts, conventional gilts and national savings. In the case of national savings, the target for 1982–83 will be £3 billion, just a little below the figure for last year.