HC Deb 11 February 1969 vol 777 cc271-2W
71. Mr. Arthur Lewis

asked the Chancellor of the Exchequer what request has recently been made to the banks on his instructions to tighten up credit; what has been the response; and what action he proposes to enforce the Government's policy regarding this matter.

Mr. Harold Lever

In a published exchange of letters on 31st January, the Bank of England re-emphasised the importance which the authorities attached to achievement of the bank lending target set for next March, and the London clearing banks, while fully accepting their responsibilities in carrying out the official policies, noted the difficulties which achievement of the target would involve.

I know that the clearing banks will do their very best to overcome these difficulties. I do not think that any further action is needed at present.

Mr. Barnett

asked the Chancellor of the Exchequer by how much the banks had exceeded, on the most recent date for which information is available, the most recent lending target he had asked them to meet.

Mr. Harold Lever

On the most recent date for which information is available, the banking system as a whole (including the discount houses) was about £250 million (3½ per cent.) above the ceiling within which the authorities have asked for lending to the private sector to be contained by mid-March this year.

Mr. Barnett

asked the Chancellor of the Exchequer what estimate he has made of the effect on consumption of each £100 million that the banks exceed the lending target set by him.

Mr. Harold Lever

The precise figure would depend on the categories of borrowing affected. I believe that a large part of consumer borrowing at the margin is immediately reflected in consumer spending.

Mr. Barnett

asked the Chancellor of the Exchequer what is his estimate of the increase of Income Tax, Corporation Tax or Purchase Tax required to achieve the same objective that he estimated would result from a reducation of £100 million in bank lending.

Mr. Harold Lever

A simple comparison is not possible, mainly because a reduction in bank lending has once-for-all effects on demand whereas an increase in taxation has lasting effects.