§ Mr. Gould
asked the Chancellor of the Exchequer (1) whether he will publish in the Official Report a table showing the expansion of domestic credit in the first three months of 1983 compared with the first three months of 1979; and to what he attributes the difference;
(2) what was the increase in domestic credit expansion in the 15 months ended 31 March 1983 compared with the corresponding period ended 31 March 1979; to what he 22W attributes the difference; and whether he will publish in the Official Report a table showing the increase in each case as a percentage of the money stock at the beginning of the relevant period.
§ Mr. John Moore
The table following shows domestic credit expansion, both in nominal terms and as a percentage of £M3, for the relevent periods. DCE as a percentage of £M3 was slightly higher in the 15 months ending 31 March 1983 than in the 15 months ending 31 March 1979, DCE in the first quarter of 1983 was 5.6 per cent. of £M3, compared with 3.3 per cent. in the first quarter of 1979; the main counterparts to the higher DCE in the later period were a higher PSBR and a much lower level of funding—debt sales to the non-bank private sector totalled £3.6 billion in the earlier period and £1.3 billion in the later period. Also sterling lending overseas was £¾ billion higher in the later period.
However, any comparison between the periods is complicated, not only by the change in statistical coverage noted in the table, but also by the abolition of exchange controls later in 1979 and the removal of the supplementary special deposits scheme in June 1980; these caused sterling lending overseas, and therefore DCE, to rise more rapidly. As pointed out in a note on DCE in the June 1983 edition of the Bank of England Quarterly Bulletin, these later changes cast doubt on the relevance of DCE as an indicator of monetary conditions in current circumstances.
Domestic Credit Expansion Calendar quarterly data; seasonally adjusted DCE (£ million) DCE as percentage of £M3 at beginning of period per cent. 1 January 1978—31 March 1979 9,800 22.0 1 January 1982—31 March 1983 22,200 25.9 1 January—31 March 1979 1,710 3.3 1 January—31 March 1983 5,280 5.6
Note: The earlier periods use banking sector data, the later periods refer to the expanded monetary sector.