§ Mr. Rifkind
asked the Chancellor of the Exchequer what effect the depreciation in the value of sterling over the last 561W three months will have on the Government's original target for reducing inflation by the end of 1977.
§ Mr. Denzil Davies
Since the beginning of August the effective rate for sterling has fallen by nine percentage points. Although it is difficult to estimate the long-term price effects of changes which have occurred over such a short period, this fall could be expected to add just over 3½ per cent. to retail prices within 12 months if the pound remains at its present low level. But the effect on our target for the end of 1977 is likely to be rather less than 3½ per cent. This is partly because our original forecasts made some allowance for depreciation, and partly because some of the effect of the fall will already have been reflected in retail prices by the end of this year.
§ Mr. Joel Barnett
No. The Government are taking stock of the position in the light of developments since the cash limits were fixed. In view of the present high level of the public sector borrowing requirement, they intend that the cash limits in the White Paper should be generally adhered to. Only minor exceptions will be made to this rule, and then only after first applying every possible means of absorbing extra expenditure.