§ Mr. Heddleasked the Chancellor of the Exchequer what the effect would be on (a) the money supply and (b) the public sector borrowing requirement if the funds currently lent on first mortgages by local authorities were transferred with the borrowers' consent to building societies or other approved financial institutions in the following sums in each respect (i) £1 billion, (ii) £2 billion, (iii) £3 billion and (iv) £4 billion; and if he will make a statement.
§ Mr. Peter ReesProviding other expenditure does not increase, then transferring local authority mortgages to the building societies or other approved financial institutions would reduce the public sector's borrowing requirement. The effect on the money supply would depend on the response of those who took on the mortgages, but it is likely that monetary conditions in the economy would be434W very little changed. If public expenditure did increase in line with the transfer of mortgages, then the PSBR would revert to its original level, but because monetary conditions had been largely unaffected by the initial fall in the PSBR this increase would imply some loosening of financial conditions, and would thus be inflationary unless offset by higher interest rates.