HC Deb 08 March 1961 vol 636 cc468-71
The Chancellor of the Exchequer (Mr. Selwyn Lloyd)

With permission, Mr. Speaker, I will make a short statement. Since the recent announcement by the Federal German Government of the revaluation of the Deutschmark, there has been considerable speculation in the exchange markets based on uncertainty about whether other Governments intended to follow suit. Certain foreign Governments have now made their positions clear. At the same time, there have been reports in certain sections of the foreign Press that sterling might be devalued.

I therefore think it right to repeat my statement, made in the House last week, that Her Majesty's Government have no such intention. They do not consider that the pound is overvalued in terms of other currencies.

Mr. Gaitskell

However critical we are of the Government's economic policy, I do not think that any of us believed that Her Majesty's Government were contemplating the devaluation of sterling. No doubt, if such rumours were around, it is as well to have them scotched. Would the Chancellor of the Exchequer not agree, however, that, nevertheless, in view of the balance of payments situation, it remains essential that there should be a much stronger export drive than there has been up to now?

Secondly, would he not agree that it is much more a matter of the Deutsch-mark being undervalued than of sterling being overvalued? Does the right hon. and learned Gentleman consider that the increase of about 5 per cent, in the value of the Deutschmark is adequate to meet the situation or merely, as Mr. Harriman described it, a step in the right direction?

Mr. Lloyd

Concerning the adequacy of the step taken by the German Government, it is requisite for me only to say what has happened. It has been done and I welcome it. I had better say nothing more upon that. I also agree with the right hon. Gentleman that it was a question of the Deutschmark being undervalued.

I think that both sides of the House agree that we have a serious balance of payments problem. These, however, are problems in the long term and at present we have considerably augmented reserves, we have very large drawing rights in the International Monetary Fund, and there is no short-term problem with regard to the balance of payments. I repeat categorically that there is no intention that we should de- value sterling, and I welcome what the right hon. Gentleman has said.

Mr. Gaitskell

To clear up that last point, however, when I used the term "balance of payments" I meant the balance of payments on current account. Surely the right hon. Gentleman is not telling us that there is no short-term problem in the balance of payments on current account, when we have such a large deficit.

Mr. Lloyd

Of course, there is a problem, and we have to take the necessary steps to try to correct the trends so that there will not be a problem on current account. What I meant to say was that there is no question of there being a crisis on current account at the present time.

Mr. C. Osborne

Since the Deutsch-mark has been revalued, there has been a big run on sterling. Without asking for the exact figure, may I ask whether there has been too big a drain to defend our rate? Does my right hon. and learned Friend expect that there will be a bigger run on sterling in the next few days? Are there adequate resources to protect sterling? In support of what was said by the Leader of the Opposition, may I ask whether we can have a further drive in export markets so that the permanent position shall be safeguarded?

Mr. Lloyd

I like the last part of my hon. Friend's supplementary question better than the earlier part. As he knows, it is never the practice for the Chancellor of the Exchequer to answer that sort of question from clay to day in the House of Commons. A return is given at the end of each month and there will be a return at the end of this month.

Mr. Wade

Did the Chancellor of the Exchequer intend to imply by his answer to the Leader of the Opposition that he expected the balance of payments problem to continue as a long-term problem indefinitely?

Mr. Lloyd

It certainly will continue unless it is solved. The hon. Member knows quite well both the strength and the weaknesses of our economy. We depend, however, upon earning our living in the world, upon our exports, as the Leader of the Opposition said. If we sell sufficient exports, we shall solve the balance of payments problem. I believe that we shall.

Mr. Stonehouse

What will be the extra cost of maintaining our troops in the Federal Republic? Is any approach being made to the Germans to increase their contribution to those costs?

Mr. Lloyd

I think that on the present basis the increased cost will be about £3 million a year, or an increase from £62 million to about £65 million. The whole question of the imbalance of payments, to which that is a contributing factor, is one which is under discussion between us and the German Government and, as the hon. Member may know, I am going to Bonn later this month to continue those discussions.