HC Deb 18 October 1976 vol 917 cc324-5W
Mr. Weetch

asked the Chancellor of the Exchequer if he will publish in the Official Report figures showing the expansion of the money supply as measured by M3 in terms of money and percentage increase for the financial years 1972–73, 1973–74, 1974–75 and 1975–76, respectively.

Mr. Denzil Davies

Following is the information:

Financial Change in M3
Year £ million Percentage
1972–73 +5,733 +26.8
1973–74 +6,799 +24.9
1974–75 +3,484 +10.2
1975–76 +3,040 +8.0

Mr. Gould

asked the Chancellor of the Exchequer (1) by how much the money supply would be reduced if the £ sterling were devalued by 10 per cent., having regard to the effect on exports and imports;

(2) by how much the money supply would be reduced if a 50 per cent. import deposit scheme were introduced.

Mr. Denzil Davies

The net effects on money supply would depend on a wide range of factors, and it is not possible to make single precise estimates. One immediate impact of a devaluation would be an addition to the M3 measure of money supply, through an increase in the sterling value of the foreign currency component. In the longer term, the net effect would depend on such factors as the pressure of demand in the economy, the response of the current and capital accounts of the balance of payments, and any change in the demand for public sector debt by the non-bank private sector. But in the majority of cases the net effect would be an increase in money supply.

With an import deposits scheme the usual presumption is that, while deposits were being paid, the money supply would be reduced, and that it would be increased when they were repaid. The size of these effects would be determined by such factors as the coverage of the scheme; underlying domestic economic and monetary conditions including expectations on the part of importers and operators in financial markets, which would in turn affect the availability of bank finance; and the extent of foreign inflows.