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Medium-Term Financial Strategy

Volume 13: debated on Thursday 19 November 1981

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asked the Chancellor of the Exchequer what progress is being made towards achieving the current year's targets in his medium-term financial strategy.


asked the Chancellor of the Exchequer whether the medium-term financial strategy is still in operation.

The medium-term financial strategy sets out our broad fiscal and monetary strategy. It remains our policy to maintain downward pressure on the growth of the monetary aggregates. The public sector borrowing requirement in the current year remains on the course forecast in my last Budget.

In view of the massive transfer of resources that has already taken place from the private sector to the public sector in the continuing attempt to exert the downward pressure to which my right hon. and learned Friend has referred, will he assure us that his further attempts to meet his targets will not result in any further transfer of resources and further burden being placed on private industry?

I well understand my hon. Friend's concern about that subject. Indeed, a large part of my last Budget speech was devoted to it. It remains important to curtail the growth of the public sector to ensure that it does not place too heavy a burden on the private sector. That is why it is important to contain public sector costs and, in particular, to control public sector pay.

The objective for unemployment is to reverse the rising trend as quickly as possible. The rate of increase now is one-half as great as it was 12 months ago.

Will my right hon. and learned Friend confirm that it would be the height of financial irresponsibility for the Government to plan to spend more in real terms next year than they will spend this year?

When the objective is to reduce the percentage of national resources taken by the public sector, clearly we shall be striving to achieve the opposite effect.

As the right hon. Gentleman knows, the size of the borrowing requirement next year will be disclosed at the right time, not today.

The targets that are normally referred to within the medium-term financial strategy are the money supply and the PSBR. As the Chancellor knows, we do not attach a great deal of importance to these particular hair shirts with which he has so willingly clad himself. However, I must ask him about another specifically stated target for this year. The central piece of his Budget was to keep interest rates at 12 per cent. Today, I understand that the interest rate is 15 per cent. What does the right hon. and learned Gentleman have to say about that, and what does he intend to do about it?

There is another question about interest rates later on the Order Paper. Interest rates remained significantly below the international level from the time of my Budget in the spring until the end of the summer, specifically because of the nature of that Budget, which was introduced in the teeth of the right hon. Gentleman's opposition.