The hon. Member for Barnett and Sheldon—as we used to call him in Committee on the Finance Bill —should contain himself. I shall deal with his question about liquidity. Although the scheme in terms of liquidity will have extremely difficult implications for the small firms because of the cost, it will not have—and here I agree with the hon. Gentleman—overall a significant effect, I believe, on liquidity. I pay ready tribute to the hon. Gentleman for having a heart and head in sympathy with us on the Conservative side.
The Chancellor undoubtedly let the cat out of the bag on the liquidity question—I am glad that we have the right hon. Gentleman in his place for at any rate the concluding part of the debate—when he said in the debate on the I.M.F. Letter of Intent of 25th June, halfway through the first year of operation of import deposits, that bank lending to the private sector would increase this financial year by not less than that of last year; that is, by between £600 million and £700 million. It is curious that the Chancellor should have said that, for bank lending is of the essence of liquidity. If bank lending is to be allowed to go up in the year of import deposits in exactly the same degree and quantity as it did in the year before import deposits were imposed, it does not look as if we shall get that much of a squeeze overall on liquidity.
In any event, we know that bank lending will increase this year. The Chancellor will have to let it. He is having to make a virtue out of a necessity. He has long since had to abandon the idea of keeping bank lending within the original ceiling prescribed, and the reason is simple. If the right hon. Gentleman attacks the private sector tooth and nail in the matter of bank lending and private credit, that sector will fight back through the gilt-edged market or through the market for non-marketable Government securities, to state a paradox.
The Chancellor must be aware that in the financial year 1968–69 the private sector liquidated over £525 million worth of central Government debt, £300 million worth of it in the revenue quarter; that is, the first quarter of this year. If the private sector did the same thing again in the revenue quarter of this financial year—that is, the first quarter of 1970—and liquidated central Government debt to anything like the same degree, the whole Government domestic credit expansion calculation, which pledged to the I.M.F. an increase of not more than £400 million in this financial year, would be totally falsified. I calculate that if the private sector liquidates central Government debt on the same scale as last year, the I.M.F. pledge will be exceeded by a good 50 per cent.