§ Mr. Austin Mitchellasked the Chancellor of the Exchequer if he will estimate the amount by which the money supply has been reduced as a result of the outflow of capital following the removal of exchange controls; and to what extent, and by how much, this has affected interest rates.
§ Mr. Bruce-GardyneIt is not possible to quantify the outflow of capital due to the removal of exchange controls or its monetary effect. The effect on capital flows was discussed in the October 1981Economic Progress Report. As this articles notes, it is not possible to distinguish the effect of ending exchange controls from all the other influences over the period. The effect on the money supply depends on further factors that are difficult to quantify, including the degree of substitutability between money, other sterling assets and overseas securities.