HC Deb 12 February 1973 vol 850 cc981-4

Mr. Healey (by Private Notice) asked the Chancellor of the Exchequer whether he will make a statement on his weekend meetings with European Ministers and officials and the decision to close foreign exchange markets.

The Chancellor of the Exchequer (Mr. Anthony Barber)

Following pressure last week on certain currencies, notably the Deutschemark, I have been in contact with colleagues in a number of countries over the past few days. I have twice visited Paris for discussions and have also had discussions in London with the United States Under-Secretary for Monetary Affairs.

In the circumstances it seemed desirable that the countries concerned should close their foreign exchange markets today, and the London exchange market has accordingly been closed.

The various consultations are still continuing and are proceeding well, and I know that at this stage the House will not expect me to say more.

Mr. Healey

While I appreciate the Chancellor's reluctance to say more at this stage, he must be aware that these highly publicised meetings can only have created an atmosphere which makes the central problem more difficult to solve. Is he satisfied that sufficient progress has been made at these meetings to justify this risk, particularly as any meetings on this matter without the presence of the Japanese are bound to be like a performance of Hamlet without the Prince of Denmark?

Secondly, will the right hon. Gentleman assure the House that he will maintain the undertaking he gave in his Budget speech last year not to distort the economy by fixing an unrealistic exchange rate either vis-à-vis the dollar or vis-à-vis the other European currencies? Surely the lesson of the Smithsonian agreement into which he was pushed in December 1971 is that it is very dangerous for the sake of co-operation with European partners to accept an unrealistically high exchange rate, which can only lead six months later to a decision to lower the exchange rate, contrary to obligations already assumed.

Does not the nature of this crisis emphasise the dangerous irrelevance of the Prime Minister's undertaking to create a European monetary union by 1980, as a European currency, the Deutschemark, has already appreciated by more than 50 per cent. against sterling—more than against any major foreign currency?

Mr. Barber

The answer to the last part of the question is "No, Sir." It is obviously highly desirable that there should be consultations and also that there should be some meetings. My task in the numerous consultations which have taken place during the past few days has been twofold—first, to help to reach a solution which is equitable to all and realistic and, secondly, in the course of that to safeguard the interests of the United Kingdom. The right hon. Gentleman may rest assured that considerations which particularly affect sterling are being taken fully into account, just as we for our part are taking fully into account considerations which affect other countries.

Mr. Healey

Will the Chancellor answer the specific question: does he still maintain the undertaking he gave to the House in his Budget speech last year not to distort the economy by accepting an unrealistic exchange rate for sterling?

Mr. Barber

Sir, the whole object of these negotiations—and I used the word "realistic"—is that we should arrive at a realistic solution for all concerned.

Mr. Ridley

Does not my right hon. Friend agree that the effect of this crisis on Great Britain has been almost nil? May I, therefore, congratulate him on having floated the pound last year, which enabled us effectively to escape all these troubles?

Mr. Barber

It is certainly true that sterling has not been under pressure, but it is also true, as I have said on a number of occasions, that we intend to refix when conditions permit.

Mr. Roy Jenkins

Does the Chancellor accept these two points? First, it is not much good closing the exchange markets unless we have a fairly clear idea of the new circumstances in which we can reopen them. Secondly, does not the Chancellor agree that what is really at issue here is a fundamental change in the position of the dollar? The old so-called logical asymmetry of the Bretton Woods Agreement is still assymmetrical but has now lost all possible logic. With the dollar having given up its obligation to act as the pivot to gold it is not acceptable in the medium term that when there is pressure on the dollar it should fall upon other Governments, such as the German Government, and not upon the American Government.

Will the Chancellor assure us that the measures for a fundamental reform of the system, which seemed to be moving with some momentum after August 1971 but have lost momentum to a considerable extent, will be pushed forward with all the energy he can command?

Mr. Barber

The right hon. Gentleman is right in stressing the fact that events of recent days have shown the urgent need for international monetary reform. After the meetings which were held in London last autumn, the first with the Finance Ministers of the enlarged European Community and shortly thereafter the conference of the 30 Commonwealth Finance Ministers, followed closely by the important and forthcoming speech by the United States Secretary to the Treasury at the IMF, I agree that the time has come to make faster progress. I shall be going to Washington next month for a meeting of Ministers of the Committee of Twenty on this subject.

Mr. Tugendhat

Is my right hon. Friend aware that no one would wish to press him into revealing his hand while the negotiations are in progress. In addition to what was said on the dollar by the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) there has also been the fundamental change in the position of the yen. Will my right hon. Friend do his best to ensure during the negotiations that the Japanese carry their full share of responsibility for what is happening? Will he also do his best to ensure that in the event of the Japanese having to restrain their exports to the United States, for whatever reason, they are not allowed to disrupt European markets, including the British market, to the extent that they have disrupted the United States market?

Mr. Barber

I note what my hon. Friend said but I do not think that it would be helpful at this stage to comment.

Mr. Pardoe

Is the right hon. Gentleman aware that we share his profound sense of relief that Great Britain is not under pressure in this crisis? Does he realise that the reason why it is not under pressure is that the pound is floating? Now that money is after all nothing but a commodity, his statement that he wishes to refix would be of the utmost disservice to this country.

Mr. Barber

I did not say that we wished to refix. I said that we intend to refix when conditions permit.

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