HC Deb 17 January 1967 vol 739 cc31-4
The Chancellor of the Exchequer (Mr. James Callaghan)

As the House is aware, the Government have felt for some time that there may be room for greater international co-ordination between those countries whose monetary and credit policies are liable to have a particularly significant effect in the world.

In my speech to the International Monetary Fund last September, I pointed out the danger that tight credit and high interest rates which may be appropriate to any one country in the management of its own affairs can lead to competitive increases round the world from which none of us gains and all of us suffer. What is needed if it can be achieved is a measure of international disarmament of interest rates.

It is for this reason that, after some preliminary discussion with my colleagues overseas, I invited M. Debré, of France, Professor Schiller, of the Federal German Republic, Signor Colombo, of Italy, and Mr. Fowler, of the United States, to the meeting which will be held at Chequers next weekend.

I am glad to tell the House that all of them readily accepted the invitation. We shall be having exploratory talks with a view to reaching a better understanding of the bearing on each other's positions of the monetary measures that we each take, and it is the Government's hope that they will lead in due course to improved co-ordination between our countries which will be of practical benefit to us all.

Mr. Iain Macleod

The Chancellor of the Exchequer will be aware that this initiative and this meeting will be warmly supported on both sides of the House. Could he tell us whether he intends to issue a communiqué after the weekend, or to report to the House next week?

Mr. Callaghan

I think that we should have to discuss among the five Ministers whether a communiqué should be issued or not, but if not I will certainly undertake to report back to the House. I thank the right hon. Gentleman for what he says about the initiative.

Mr. Ronald Bell

Will the Chancellor consider at that meeting the advisability of pressing for an increase in the price of gold and the adoption of a floating exchange rate as solutions to the grave economic problems of the Western world?

Mr. Callaghan

The meeting is not being called primarily for the purpose of discussing either the price of gold or international liquidity, although, naturally, I suppose that if any Minister were to raise those topics his colleagues would listen. I would be bound to make it clear if such topics were raised that in the view of Her Majesty's Government—and indeed it is far more widely spread than that—a proposal to raise the price of gold would not solve any of the problems with which the Western world is faced.

Mr. Biffen

Would the Chancellor not agree that practically all the Government's international activities at the moment must be seen in the context of the decision to seek membership of the Common Market? Will he therefore bear in mind the validity of the observation of my hon. and learned Friend the Member for Buckinghamshire, South (Mr. Ronald Bell), for unless the British Government show some sympathy with and appreciation of the views associated with the French over the price of gold there is very little likelihood of British membership of the Common Market?

Mr. Callaghan

It would be entirely against the interests price of gold to be circumstances—[An HON. MEMBER: "Why?"]—because our gold-valued liabilities exceed our gold stock and if one doubles one one doubles the other. It is as simple as that.

Apart from that, it is not in the interests of the world that we should attempt to deal with the problem of increasing world liquidity by doubling the value of the gold stocks of those countries which happen to hold gold and have made it a business to hold gold, as against the would be entirely of Britain for the large number of other countries which have not had that opportunity.

Mr. Shinwell

Will my right hon. Friend be good enough to answer the question just addressed to him and take note of the implications? He is surely aware that Mr. Maurice Schumann stated recently that one of the conditions that must be accepted by this country before we are allowed to enter the Common Market is that we agree to double the price of gold.

Mr. Callaghan

I noticed that observation and a great many others, but as far as I know Mr. Maurice Schumann is not negotiating on behalf of the French Government and his speeches have as much value as those of any other private commentator on this subject. There should be no misunderstanding about this matter as regards the price of gold. I know of no one who studies the issue who believes that that is the best way to increase international liquidity.

Mr. Kenneth Lewis

When the Chancellor rose just now we thought that he was going to tell us something. Is he not wasting our time? Is he aware that the announcement he has just made has appeared in every newspaper in the country? How did that happen?

Mr. Callaghan

It appeared in every newspaper in the country because when five countries are concerned we have to agree about the date of publication. I reflected on whether I should take up the time of the House on this matter and came to the conclusion that if I did not make a statement I would probably be criticised for not having told the House about it.

Mr. Ginsburg

Would my right hon. Friend be a little less dogmatic on the question of the price of gold? Will he read the Labour Party's policy statement for 1953, in which he will find that this was considered to be one possible way of dealing with the problem of international liquidity?

Mr. Callaghan

Of course, raising the price of gold is a possible way of increasing world liquidity. What we are concerned with is whether it is a way which would be beneficial to Britain and the world. I have already stated quite shortly and succinctly three separate reasons why it will not be.

Mr. Ian Lloyd

As the United States appears to be moving, however tentatively, towards a position where it intends to include its fissile materials in its international monetary reserves, could the Chancellor not suggest that this is perhaps a much more rational method of increasing international liquidity and one which he himself should consider following?

Mr. Callaghan

We are in danger of launching out into very broad discussion. I suppose that almost anything will be in order when we meet at Chequers on Saturday and Sunday. But I say most seriously that the best way to increase international liquidity in the Government's view—and certainly very strongly in my view—is to pursue the schemes that have been worked out with such great care and considerable agreement among many of the major nations in the world and not to discard that kind of scheme, when we are approaching a point at which we might get agreement, in favour of some other method which, in the view of all of us, I think—certainly of most of us—would be far inferior.