§ Mr. Austin Mitchellasked the Chancellor of the Exchequer what classes of lending or borrowing involving overseas residents and £ sterling, or United Kingdom residents and foreign currencies, are outside the definition of sterling M3 and domestic credit expansion, respectively; what is the estimated value of these transactions in the year preceding the abolition of exchange controls and in the period since; and to what extent these transactions would come under effective control as a result of (a) the changes which the Government propose in the monetary system and (b) a monetary base system which covered only the banks' reserves with the Bank of England, with a current or lagged mandatory requirement.
§ Mr. Lawson[pursuant to his reply, 7 August 1980]: The definition of sterling M3 relates to United Kingdom residents' sterling deposits with the United Kingdom banking sector. It thus excludes both non-residents' sterling deposits and 426W residents' foreign currency deposits. A change in sterling lending to overseas residents is included within DCE, but not a change in foreign currency lending to United Kingdom residents. The estimated values of the banking sector's transactions in these categories are published in table 6.2 of Financial Statistics.
The changes proposed in the Green Paper on monetary control have few implications for the control of transactions in these categories. The abolition of the SSD scheme, however, may cause some switching of residents' foreign currency transactions back into sterling or nonresidents' offshore sterling transactions back into the United Kingdom banking sector. How the various transactions described above would be affected by a monetary base control scheme would depend on how that scheme operated, were it to be introduced, and in particular the definition of banks' liabilities to which it applied.