§ Mr. Lawsonasked the Chancellor of the Exchequer if he will provide a table showing the annual rates of growth of both M1 and £ sterling M3, on a seasonally adjusted basis, over the three months and six months to mid-April 1978, and similarly over the three months and six months to end-February 1974.
§ Mr. Denzil DaviesMoney supply figures for end-February 1974 are not available. On a mid-monthly basis, the information is as follows—all figures seasonally adjusted:
the monetary aggregates and the development of output and prices are not well established, and it is therefore not possible to make any precise deduction about the specific effects of the increase in sterling M3 last year. The inflows were, however, associated with a large increase in the bank deposits of industrial and commercial companies, particularly in the last quarter of 1977, which seem to have reflected in part a change at that time in portfolio preferences in favour of sterling and away from other currencies. Personal sector deposits grew much more slowly. It seems unlikely that the increase in company sector bank deposits will have any significant effect on companies' United Kingdom expenditure; but to a much greater degree than financial institutions and private individuals, companies are likely to keep their funds in liquid form against future commitments, rather than invest in longer-term financial assets such as gilts. The excess of monetary growth above my right hon. Friend's preferred range may, therefore, have relatively little direct effect on the real economy or on inflation. For the future, the Government intend to maintain firm 271W control over the growth of the money supply; the increases in interest rates since mid-March, particularly short-term rates, reflect the Government's determination to keep sterling M3 within the 8 per cent. to 12 per cent. target for the year to mid-April 1979.