§ 16. Mr. Roy Jenkinsasked the Chancellor of the Exchequer what steps he is taking to improve the free rate of exchange for transferable sterling.
§ Mr. R. A. ButlerI have nothing to add to the statement which I made on Thursday, 24th February.
§ Mr. JenkinsIs the Chancellor satisfied that having representatives of the Bank of England dealing in the free currency markets of the world and using our scarce gold and dollar reserves for this purpose will, in fact, produce a net gain of dollars? Will the right hon. Gentleman not agree that this would have been quite unnecessary if he had not prematurely removed restrictions last March?
§ Mr. ButlerNo, Sir. I do not take that view at all. I take the view that this operation has been conceived with a view to husbanding and using as best we can our precious gold and dollar reserves. Moreover, in answer to the second part of the hon. Member's supplementary question, had we not adopted the policy which we adopted we should not have restored buoyancy and prosperity to the economy of our country.
§ Mr. GaitskellDoes the right hon. Gentleman not realise that the intervention of the Exchange Equalisation Account in the market for transferable sterling, in the manner stated last Thursday, really amounts to convertibility of the £by the back door? Does the right hon. Gentleman realise that this means-in effect, that any non-resident or foreigner holding sterling is now able to convert it into dollars at the expense of our reserves, while we and other countries of the sterling area still have severe restrictions on dollar imports?
§ Mr. ButlerNo, Sir. It is not as simple as that. In answer to the right hon. Gentleman's point, which has been canvassed in the Press and is a very important one, the position is that this practice does not alter or increase the rights of a foreign holder of sterling. The authorities will refrain or intervene as they think fit, but I do not think that we have quite reached the situation which the right hon. Gentleman has described.
§ Mr. JenkinsBut does the right hon. Gentleman really think that his policy, which has led to free sterling being quoted at rates down to 2.71 dollars, and which has necessitated these highly hazardous operations, has been really successful?
§ Mr. ButlerIt has been a great deal more successful than allowing the transferable rate to stand at about 2.50 dollars, which was where we found it.
§ Mr. GaitskellIs the right hon. Gentleman aware that many authorities on this subject, including foreign bankers, estimate that we have lost a large number of dollars because of operations in the transferable sterling market, operations which would not have been possible if it had not been for the relaxations introduced last March?
§ Mr. ButlerI would say quite otherwise. I should not have acted if, as has 1867 been observed by the hon. Member for Stechford (Mr. Roy Jenkins), who put a question on the Order Paper about this before I acted, there had not been difficulty in the transferable area. This difficulty was due to a variety of causes, a summary of which I have given in statements not only in the House but in the country. I do not think that I can add to those statements on this occasion.