Money Supply (Hansard, 14 January 1980)

§ Mr. Austin Mitchell
asked the Chancellor of the Exchequer what is the definition of the money supply used in table 138 of the 1979 edition of "Basic Statistics of the Community", published by the Statistical Office of the European

Item Financial Statistics Table No.

Official reserves … … 2.6

Official financing … … 2.6^*

External and foreign currency component of the money supply … … 7.3 (col. 12)

Foreign investment in public sector securities … … 2.6

Foreign residents' deposits with United Kingdom banks … … 6.21 and 7.3

United Kingdom banks switching into the £ sterling … … 7.3 (col. 18)

^* In the summary presentation of table 2.6, "direct external finance"—column 8—is equivalent to the overseas sector's contribution in the analysis by sector in table 2.6—continued. "Official financing" in the balance of payments accounts—e.g. tables 11.1 and 11.4—consists of the sum of the seven columns with the words "overseas official financing" in table 2.6—continued. It will be noted that three of these headings are attributed to the banking sector. These represent foreign currency currency borrowing from United Kingdom banks and the banks will have taken foreign currency deposits from overseas to finance their lending. In the balance of payments accounts these flows are grouped with relevant borrowing directly from overseas. The sum of the three "overseas official financing" columns attributed to the banking sector in table 2.6—continued—differ from column 7 in the summary because the latter includes a relatively small amount of foreign currency borrowing by local authorities and public corporations outside the exchange cover scheme, which is not included as official financing in the balance of payments. This element and the other columns attributed to the overseas sector in table 2.6—continued—are included indistinguishably in "investment and other capital transactions" in the balance of payments accounts.

† Table 7.3 does not distinguish foreign residents' foreign currency deposits with United Kingdom banks; this information is shown in table 6.2.

650W
Communities; and whether the United Kingdom series is (a) comparable with those of the other countries, and (b) representative of the money supply for the purposes of monetary management.

§ Mr. Lawson
The table is based on the M1 definition of money supply. There are, however, some differences in interpretation of the definition from country to country. The United Kingdom figures in the table are for end-of-year up to 1971 and for mid-December for 1972 onwards. As regards (a), subject to these qualifications, the United Kingdom figures are comparable with those for the other countries. As regards (b), our monetary objective is defined in terms of the broader aggregate £M3 but we monitor and take account of movements in other aggregates.

§ Mr. Austin Mitchell
asked the Chancellor of the Exchequer if he will publish in the Official Report a table showing for each year since 1970 the increase in the reserves, official financing, and the external and foreign currency finance component of the money supply, together with what information he has available on foreign investment in public sector securities and United Kingdom bank deposits, and United Kingdom banks switching into the £ sterling.

§ Mr. Lawson
Figures are published inFinancial Statistics as follows:—

Item	Financial Statistics Table No.
Official reserves	…	…	2.6
Official financing	…	…	2.6^*
External and foreign currency component of the money supply	…	…	7.3 (col. 12)
Foreign investment in public sector securities	…	…	2.6
Foreign residents' deposits with United Kingdom banks	…	…	6.21 and 7.3
United Kingdom banks switching into the £ sterling	…	…	7.3 (col. 18)
^* In the summary presentation of table 2.6, "direct external finance"—column 8—is equivalent to the overseas sector's contribution in the analysis by sector in table 2.6—continued. "Official financing" in the balance of payments accounts—e.g. tables 11.1 and 11.4—consists of the sum of the seven columns with the words "overseas official financing" in table 2.6—continued. It will be noted that three of these headings are attributed to the banking sector. These represent foreign currency currency borrowing from United Kingdom banks and the banks will have taken foreign currency deposits from overseas to finance their lending. In the balance of payments accounts these flows are grouped with relevant borrowing directly from overseas. The sum of the three "overseas official financing" columns attributed to the banking sector in table 2.6—continued—differ from column 7 in the summary because the latter includes a relatively small amount of foreign currency borrowing by local authorities and public corporations outside the exchange cover scheme, which is not included as official financing in the balance of payments. This element and the other columns attributed to the overseas sector in table 2.6—continued—are included indistinguishably in "investment and other capital transactions" in the balance of payments accounts.
† Table 7.3 does not distinguish foreign residents' foreign currency deposits with United Kingdom banks; this information is shown in table 6.2.