§ 29. Mr. Nabarro
asked the Chancellor of the Exchequer, having regard to widespread anxiety concerning continued weakness of sterling, what steps he is taking to prevent an autumn financial and economic crisis; and whether 629 he will make a statement upon outflow of funds in recent months and on the weakening of sterling.
§ Mr. Barber
I will answer the second part of the Question first. The foreign exchange market was disturbed following the revaluation of the Deutschmark and the guilder in March. With the underlying deficit in our balance of payments, sterling came under pressure, and the reserves fell by £62 million in the month. Although this pressure was subsequently reduced, the outflow of funds continued on a smaller scale and the reserves fell by £26 million in April and £16 million in May. They then stood at £1,037 million.
My right hon. and learned Friend is well aware of the possibility of an overload on the economy threatening the balance of payments and will act as necessary to deal with this.
§ Mr. Nabarro
Would my hon. Friend confirm that the first, second and third lines of our reserves are adequate for all foreseeable contingencies? Secondly, and more important, would he confirm that in no circumstances will the Chancellor contemplate devaluation of sterling in the autumn?
§ Mr. Barber
My right hon. and learned Friend the Chancellor has already stated categorically that sterling will not be devalued and I emphatically repeat that statement now. Concerning the adequacy of our reserves, at the end of May the reserves stood at £1,037, or £60 million higher than they were at the beginning of 1960. In addition, the United Kingdom drawing rights in the International Monetary Fund are completely unused. In the meantime, the co-operation between central banks agreed upon at Basle in March, although intended to deal with short-term movements of funds, was not a short-term understanding. The United Kingdom is thus able to call on resources which are fully adequate to meet any speculative attack on sterling.