asked the Chancellor of the exchequer what was the increase in the money supply, at an annual rate, in the latest quarter for which figures are available, according to the M3 definition, and according to the Government's preferred definition, respectively ; and if, in the light of these figures, he will redefine the objectives of monetary policy for the remainder 18. Mr. William Hamilton asked f the current financial year.

As to the first part of the Question, figures for the third calendar quarter of this year are not yet available. On a seasonally-adjusted basis, in the three months to mid-October M3 rose by 6½ per cent., or an annual rate of 28·5 per cent., whereas Ml fell by 2¼ per cent. The figures for M3 are inflated by special factors, such as the changeover to VAT and the arbitraging activities of some of the banks' large customers, while the Ml figures have probably been reduced by switching from current accounts to interest-bearing deposits at the banks. As to the second part, the objective is to secure rates of growth of money and credit compatible with the sustainable growth in the economy and our counter-inflation policies.

I am grateful to my right hon. Friend for that reply. Will he confirm that it remains the Gov ernments' view that to suspend competition and credit control would have highly undesirable side effects without in any way contributing to the solution of the problem of financing perhaps a very large borrowing requirement in a non-inflationary manner?

I have already expressed my views at some length on the Bank of England's competition and credit control arrangements. If there is any way in which those arrangements—which are new ones—can be improved, I shall be happy to consider it.

Does the Chancellor intend to take steps to limit the activities of the large industrial companies which take money on loan from banks and re-lend it, in view of the point he made in his statement that those activities had contributed to the growth of M3?

In view of the later steps which the Government took about a fortnight ago, I think I am right in saying, although I should, naturally, like to check it, that those arbitraging activities are not now occurring.

Will the Chancellor assure the House that he will abandon competition and credit control before January?

No, Sir.

Does my right hon. Friend agree that there is a great distinction, and has been for many months past, between the figures for Ml and M3? Is he prepared to look again at the definitions of Ml and M3 to see whether there might not be a more reliable method of tracing monetary progression? Perhaps he might think of devising M2.

As I explained in my answer, M3 is inflated by certain special factors, and the Ml figures have been reduced by the switching to which I referred. Neither measure of money supply by itself gives a good indication of the recent underlying trend. Obviously both should be taken into account, but together with other indicators, in assessing monetary conditions. I have a great deal of sympathy with my hon. Friend—I am not alone in this—in doubting these definitions and the conclusions which are often drawn from them.