asked the Chancellor of the Exchequer (1) what regular assessment he carries out of the effect on the Government's economic and monetary policies of the Bank of England's purchase of commercial bills on a large scale;
(2) what was the effect on interest rates in 1982 of the Bank of England's purchase of commercial bills.
§ Mr. Moore
I refer the hon. Member to articles in the June 1982 edition of the Bank of England Quarterly Bulletin (page 201), the March 1982 edition (pages 86–94) and the December 1982 edition (pages 511–518). The Bank of England's purchases of commercial bills have been used to offset shortages in the money markets caused by net flows of funds to the Exchequer. They have the effect of smoothing day-to-day fluctuations in very short-term interest rates, and avoiding, in the longer term., rises above the level appropriate for the Government's monetary policy.
asked the Chancellor of the Exchequer how the current level of sales of commercial bills compares with the level in each of the past 20 years.
asked the Chancellor of the Exchequer (1) further to his reply of 5 July, Official Report, c.53–54, about commercial bills, why commercial bills sold by the banks to the Bank of England are included in his definition of the money supply prior to sale;
(2) further to his reply of 5 July, Official Report, c. 53–54, about commercial bills, what eventually happens to the commercial bills purchased by the Bank of England; and by what mechanism they are prevented from passing into the private sector and thence into the money supply.
§ Mr. Moore
[pursuant to his reply, of 18 July 1983, c. 66]: Commercial bills are not included in sterling M3. Sterling lending to the United Kingdom private sector, a credit counterpart to £M3 growth, does include net purchases of commercial bills by the monetary sector from the non-bank private sector. But net sales of commercial bills by the monetary sector to the issue department of the Bank of England do not affect total lending.
Commercial bills purchased by the issue department from the monetary sector are generally held until maturity, 179W when the borrower redeems them. They may also be sold back to the monetary sector as part of the Bank of England's operations in absorbing money market surpluses.