§ Dr. Roger Thomas
asked the Chancellor of the Exchequer if he will publish an estimate of the increased velocity of circulation of money as the result of non-bank financial intermediaries attracting deposits from the United Kingdom banks.
§ Mr. Lawson
Deposits with non-bank financial intermediaries are not included in the target monetary aggregate132W £M3. An increase in these deposits at the expense of United Kingdom banks will therefore be reflected in the first instance in the stock of £M3 being lower than it would otherwise have been. This will cause a temporary increase in the velocity of circulation. The Government are conscious of the effect that switches in deposits can have on the relationship between the monetary aggregates and the rest of the economy and this is one reason why a number of aggregates are kept under observation. There has been a tendency over a number of years for deposits at building societies to increase at a faster rate than those at the United Kingdom banks, but this has not been a feature of recent months.