§ Mr. Gouldasked the Chancellor of the Exchequer what was the value of commercial bills purchased directly or indirectly by central Government in each year since 1979; what were the reasons for any change; and when he expects the money thus injected into the system to show up in the money supply.
§ Mr. MooreColumn 15 in table 1.3 ofFinancial Statistics sets out figures for transactions in commercial bills by the issue department of the Bank of England. The figures are as follows:
Year Purchases in £ million 1979 12 1980 403 1981 2,559 1982 4,714 Bank of England purchases of commercial bills have been used to offset shortages in the money markets caused by net flows of funds to the Exchequer.
54WNet flows of funds to the Exchequer can arise for a variety of reasons. In 1981 and 1982 they arose in large part as a result of heavy sales of Government debt undertaken in order to restrain the broad monetary aggregates. These debt sales exceeded the Exchequer's current net disbursements. In the first instance the Government used the excess to repay Treasury bills; but when the outstanding total of Treasury bills had been reduced to the minimum practical level the issue department of the Bank of England began instead to acquire commercial bills.
The Bank of England's purchases of commercial bills do not inject new money into the private sector and do not affect the money supply.
A full description of the Bank of England's role in the money market can be found in the articles on pages 86–93 of the march 1982 Bank of England Quarterly Bulletin, and on pages 514–518 of the December 1982 edition.