§ Lord Bruce-Gardyne
asked Her Majesty's Government:
What is their assessment of the relative contributions of public sector borrowing, bank lending to the personal sector for purposes of financing consumer expenditure, bank lending for housing finance, "round tripping" by the corporate sector, and other factors, respectively, to the growth of sterling M3 in the latest banking month; and what measures they intend to introduce to bring the growth of broad money into line with the target range for the current financial year.
The Earl of Gowrie
The relative contributions of the public sector, sterling lending to the private sector and other factors—namely, net non-deposit liabilities and external counterparts—to the growth of sterling396WA M3 I n banking April, seasonally adjusted, were as follows:—
Public sector contribution £m % of rise in£M3 Central Government borrowing requirement +823 Other public sector borrowing less debt sales to UK non-bank private sector (NBPS) +147 Central Government debt sales to UK NBPS -1,233 Total public sector contribution -263 -8 Sterling lending to UK private sector +2,627 83 Other factors: External counterparts +1,419 45 Net non-deposit liabilities -610 -19 Total change in £M3 +3,173 100
Sterling lending was substantially increased during banking April by borrowing to finance payments for investment brought forward to take advantage of the higher investment allowances prevailing up to the end of 1984–85.
Figures for the breakdown of bank lending to the personal sector are not yet available. There are no statistics for "round-tripping", but there is no reason to think that net round-tripping made a significant contribution to monetary growth in banking April.
The Government are committed to maintaining monetary conditions that will bring down inflation. The two target aggregates, MO and £M3, are given equal weight and other available evidence, including the exchange rate, is taken into account. The Government will take whatever action is necessary to maintain appropriate monetary conditions. But it would be wrong to read too much into one month's figures: the April figure for growth in £M3 was clearly erratic.