HC Deb 27 June 1972 vol 839 cc1176-8
12. Mr. Cronin

asked the Chancellor of the Exchequer what consideration he has given to the future exchange rate of the £ sterling.

Mr. Barber

I would refer the hon. Member to the statement I made on 23rd June.—[Vol. 839, c. 877–87.]

Mr. Cronin

Is not the sudden devaluation of the £, precipitated by runaway inflation, an indication of the complete bankruptcy of the Government's economic programme and the total falsity of the Prime Minister's election promises? Would the right hon. Gentleman remember that, if he intends to ask the unions to bale him out of this situation by way of restraint on wage claims, the first thing that he must do is reverse the Government's policies, which have been unrestrainedly partisan and provocative? Finally, would the right hon. Gentleman reassure us that he will take steps to protect the low income groups in this devaluation?

Mr. Barber

In answer to an earlier Question, I explained the position of the low income groups. If I may refer to those people on small incomes for whom the Government have a special responsibility, it is worth noting that the purchasing power of the retirement pension is almost 5 per cent. higher than it was in June, 1970. As the hon. Gentleman knows, pensions are being raised by a further 12½ per cent. in October. But the hon. Gentleman is quite right to point out—this was the implication behind his question—that our first priority is inflation.

Sir Robin Turton

I congratulate my right hon. Friend on the very wise and timely decision that he took last Friday, but will not the success of his policy depend on his ability to contain the increase in money supply in the next few months?

Mr. Barber

It is certainly true that the rate of increase in money supply is a most important factor, and one which I have very much in mind.

Mr. McBride

Since the right hon. Gentleman refers to the lower income groups, has he failed to realise that the persons on the lowest disposable income and the lowest standard of living, who are most likely to be most heavily affected by his creeping devaluation proposals, are the retirement pensioners? Will he not now, in decency, bring in supplementary pensions Estimates to increase at once the retirement pension?

Mr. Barber

I have explained that the purchasing power of the retirement pension is almost 5 per cent. higher than it was when we came into office. As for the future, I think that the whole House was very pleased that the Government acceded to the request, which has been made repeatedly for 20 years or so, that there should be a review of pensions every year.

Mr. Healey

When the Chancellor met his colleagues among the Common Market Finance Ministers yesterday, did he raise with them the point that the devaluation of the £ means an increase in prices not only of imported food next year but of British food under the common agricultural policy? Did he insist to them that it is intolerable for the British Parliament and people to accept this additional impost?

Mr. Barber

I have already said in answer to the right hon. Gentleman or one of his hon. Friends that any effect on prices of the action that we have taken will certainly be very much less than the effect on prices of excessive pay claims. If the right hon. Gentleman wishes to ask me about my discussions in Luxembourg yesterday, I can say to him that the very first point made to me yesterday in Luxembourg by the first Finance Minister I met concerned the right hon. Gentleman's remarks.

Mr. Tapsell

Has my right hon. Friend noticed that hon. Members opposite, just now echoed by the right hon. Member for Leeds, East (Mr. Healey), repeatedly use the word "devaluation" to describe a floating operation of the £ which has not yet been properly tested in the foreign exchange markets of the world? Is this not further evidence of their attempts to talk down sterling?

Mr. Roy Jenkins

Following that question, and reverting to the Question on the Paper, does the Chancellor endeavour to pretend, as he did on Friday and over the weekend, that this is not a devaluation? Has he any intention of returning or any belief that we can return to a rate of 2.60 dollars—[An HON. MEMBER: "What about 2.40?"] No, 2.60 is not equivalent to 2.40, because the dollar has changed and we are lower today against the weighted average of world currencies than we were in December. This is a very important point—[HON. MEMBERS: "Who repaid the debt?"] Hon. Members should not get so excited. Will the Chancellor give us any indication of what he said in Luxembourg yesterday about how long a period of floating he expects us to undergo?

Mr. Barber

On the first point, the London market has opened only today, and the European markets are still closed, and I should therefore have thought that it was too early to draw conclusions. As for the second point, about how long the floating will continue, I have made it clear, as I did last Friday, that it will be temporary. I have explained to our Common Market colleagues that we shall return to a fixed parity as soon as possible.