HL Deb 16 January 1985 vol 458 cc962-4

2.40 p.m.

Lord Bruce-Gardyne

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. May I point out that the last word of the Question should be "policy" and not "police"?

The Question was as follows:

To ask Her Majesty's Government whether they now expect the broad aggregate, £M3, to grow within the target limits over the current target period for monetary policy.

Lord Glenarthur

My Lords, though month to month fluctuations are difficult to predict, there are no grounds to expect at this stage that sterling M3 will be outside the target range for the target period as a whole.

Lord Bruce-Gardyne

My Lords, I am most grateful to my noble friend for that very reassuring Answer. Does he agree that the rise in interest rates this week, far from being a disaster in this context, could be taken as a highly desirable move?

Lord Glenarthur

Yes, my Lords, it is highly desirable, and I am grateful to my noble friend for asking that supplementary question.

Lord Molson

My Lords, since the original Question was totally incomprehensible to a great many of your Lordships, may I thank my noble friend for his lucid reply? In order to enlighten noble Lords who, like myself, are not familiar with the language of monetary policy and macro-economics, may I ask four supplementary questions?

What does my noble friend understand by "broad aggregate"? An aggregate is a collection of individual items. What are the individual items that are being aggregated in order to form the "broad aggregate"? What are the "target limits"; and what is the period of time referred to as the "current target period"? Anything that is current obviously is running. When did the period begin to run, and when do the Government expect it to stop running?

Lord Glenarthur

My Lords, my noble friend has asked me a number of questions which I shall endeavour to answer. So far as sterling M3 is concerned, that relates, as far as I am aware, to all bank deposits. I think that my noble friend will be aware that there are various other indicators which refer to different things. The actual current period is a 14-month period, as I understand it. The actual limits for sterling M3, I am afraid I cannot find in my brief at this particular moment but I shall find them and let my noble friend know.

Lord Paget of Northampton

My Lords, I, too, have been fascinated by the noble Lord's difficulties. One point on which perhaps I did not hear an explanation is this. Is the reference in the Question to "monetary police" a printing mistake or is it a form of Cabinet commissar to keep them in line?

Lord Glenarthur

My Lords, thankfully, it is a printing error.

Lord Diamond

My Lords, does the noble Lord agree with his noble friend that the recent increase in interest rates is (as I think he said) a good thing? Can we look forward to the repetition of these good things in the Government's policy and have a number of further increases in interest rates week by week?

Lord Glenarthur

No, my Lords. As the noble Lord will be aware, it was necessary to take the steps that we took for the reasons that were carefully explained by my noble friend the other day. I do not think that I shall go further than that.

Lord Stoddart of Swindon

My Lords, is the noble Lord aware that, although he tried very well to explain these esoteric matters to his noble friend Lord Molson, many people will still remain puzzled? Is it not a fact that since the broad money aggregates have been narrowed, unemployment has risen almost in exact correlation? Is it also not a fact that the Government's monetary policy, far from assisting inflation and interest rates, has done the reverse, and that we are enjoying the highest interest rates now that we have had for a long time? Would it not be far better if the Government abandoned their monetarist policy and ran the economy on a proper, planned basis which would benefit the unemployed, the rest of the economy and the rest of the community to a very great extent?

Lord Glenarthur

My Lords, the noble Lord can rest assured that lower inflation depends upon maintaining a firm monetary control and that is what we propose to do.

Lord Harmar-Nicholls

My Lords, is it not a fact that, on the other side of the coin, the result of the broad aggregate has been more jobs, and that the percentage per thousand of the population has provided more jobs in this country than in any other European country except Denmark? Is that not one of the results that we ought to keep in mind when offering criticism?

Lord Glenarthur

My Lords, I am sure that my noble friend is right.

Lord Bruce-Gardyne

My Lords, for the elimination of doubt, can my noble friend confirm that the currency monetary aggregates were first introduced by the then Chancellor, Mr. Healey, when he was responsible for these matters, and that the current target is from 6 per cent. to 10 per cent?

Lord Glenarthur

My Lords, I am grateful to my noble friend for that information. I am sure that my noble friend Lord Molson will note the figures that he gave.