§ Mr. Austin Mitchellasked the Chancellor of the Exchequer what evidence he has of a causal connection between the size of the public sector borrowing requirement and the rate of inflation: and if he will publish this in the Official Report.
§ Mr. LawsonThe main channel by which a higher PSBR leads to higher inflation is through higher monetary growth. A sustained excessive PSBR can be financed in a non-inflationary way only at the cost of unacceptable interest rates. The objective of the Government's fiscal policy is to reduce inflation with acceptable interest rates.