I should first like to endorse the congratulations of my right hon. Friend the Secretary of State for Trade and Industry yesterday to my hon. Friend the Member for Hove (Mr. Sainsbury) on an excellent maiden speech. I should also like to express my regret that I was not able to hear personally the speech of a fellow Yorkshireman, the right hon. Member for Barnsley (Mr. Mason), not only because of his considerable knowledge of the mining industry, but also because of what was, I was told, a very moving description of his own family's experience.
Many points have been raised during this two-day debate, and I want at the outset to deal with some of those and to answer some of the questions which have been put. Then I want to come to what throughout the debate have been the major issues in speech after speech—and they were touched upon by the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins). First, is the extent to which we have restrained demand too great? Secondly, is it too small? Thirdly—and this has been the topic of many speeches, and certainly of the right hon. Member for Stechford—given the need to restrain home demand which is not in dispute, at least between the two Front Benches, are the measures which I announced the right measures for the situation which now faces the nation?
I want to devote some time to those, but, first, I hope that for one moment the House will allow me to deal with a technical matter which has been raised; that is, the new supplementary technique for controlling the growth of money and credit, because, of course, as a number of speakers have pointed out, this is of the utmost importance in the fight against inflation.
The new supplementary scheme is designed to discourage the banks and finance houses from expanding their interest-bearing liabilities above a certain specified rate. Hitherto, when banks have needed additional funds for lending, they have gone out into the money markets and bid aggressively for them and the result has been to raise interest rates sharply. The new technique which has been introduced by the Bank of England will make it very expensive for them to do this, because once their interest-bearing liabilities have risen to the specified level they will then be required to deposit a rising proportion of any additional interest-bearing funds with the Bank of England at no interest.
Because the banks and finance houses have been asked not to respond to the introduction of these new arrangements with a general rise in their lending rates, such bidding for extra funds would be unprofitable. The new scheme should therefore ease the pressure on money markets and so allow interest rates to be lower than they otherwise would be. That is the first advantage. The second advantage is that it should also operate to slow down the growth in the broader version of money supply, because it is the expansion of the banks' interest-bearing liabilities which has been the major component in this growth over the past two years. Together with the action which the clearing banks are taking to eliminate arbitrage transactions, this new device should lead to a marked slowing down in the growth of money and credit.
Next I come to some points concerning the new levels of public expenditure which have been raised by a number of hon. Members in the course of this two-day debate. The position is that until the Government agreed the new levels. Departments and other public authorities were planning their programmes and their projects and their future orders in accordance with the policies and the programmes which were set out in the White Paper which was published on Monday, at the same time as I made my statement.
As the House knows, those programmes for 1974–75 are now superseded by the reduced ones which I announced, and which were set out programme by programme in the table which appeared in HANSARD. AS I said, there will be some reduction for the current year—and this is important—and the years beyond 1974–75 will now be affected also by the continuing process of review which will be necessary as the situation develops.
When programmes are reduced, as we have reduced them by these measures, it is for the Ministers responsible for each programme to determine the new priorities: which projects are to keep a place—and of course, to make that possible, what can with least harm be allowed to be squeezed out for the time being—which services are essential and which are less so, which purchases can be cut down and which should be maintained. Where the local authorities are concerned, my right hon. Friends have already provided guidance by circular in a number of cases, and my right hon. Friend the Secretary of State for the Environment met the representatives of the local authorities [Interruption.]——