FOREIGN EXCHANGE MARKETS (Hansard, 2 March 1973)

§ The Chancellor of the Exchequer (Mr. Anthony Barber)
The London foreign exchange market has been formally closed for today. The arrangements on this occasion, however, are quite different from those on previous occasions, in that commercial banks are not being prevented from satisfying the requirements of their customers in foreign exchange, nor are they being prevented from dealing among themselves and with banks abroad. This action is in line with that taken in other markets in the European Community.

§ Mr. Healey
The Chancellor will appreciate that the House is concerned primarily with the impact of international currency movements during the last few days which have led to the closing of the exchange market in London. Will he say whether it is still his policy not to sacrifice growth to an unrealistic exchange rate, and, for that reason, will he say that he will resist the mounting pressure to peg the pound in relation to Common Market currencies so that all can float together?
Would not the right hon. Gentleman agree that it is the experience of recent years, under both Governments, that the pound needs more flexibility against European currencies than against the dollar, and that if he were to peg the pound against the franc and the deutschemark this would simply divert the overwhelming mass of Eurocurrency speculation against sterling?
Finally, will the right hon. Gentleman bear in mind that business is already disturbed in its investment intentions, 1846 which appeared to be picking up, by the very high interest rates and some aspects of his phase 2 prices and incomes policy, and that if he were now to peg the pound this would be the last straw in breaking the back of business confidence?

§ Mr. Barber
I dealt with a number of points raised by the right hon. Gentleman in the speech I made about a week ago on the international monetary situation, and I have certainly got nothing to add to what I said then.
Regarding the future and the question of investment, we shall be debating these matters in the Budget debate, which starts on Tuesday. I have noted what the right hon. Gentleman has said. But no decisions have been taken, and we are in close touch with our European partners.

§ Mr. Healey
I appreciate very well that some aspects of this problem were dealt with about a week ago and that others may well be dealt with in the Budget, but will the Chancellor accept, at any rate as the Opposition's opinion, that it could be disastrous to many of his intentions in the forthcoming Budget if a decision were to be taken in Bonn this weekend prematurely to peg the pound in relation to European currencies when the balance of payments outlook remains so gloomy?

§ Mr. Barber
We shall obviously bear in mind the sort of points that the right hon. Gentleman put forward. May I say to him—I say this in the light of what he has said on a number of occasions about the arrangements for European cooperation—that I realise that he has somewhat ambivalent views on European affairs, but I am somewhat surprised that he should choose this morning, of all mornings, to expose them.

§ Mr. Milne
Although the Chancellor says that there is a difference on this occasion in the closing of the foreign exchange markets, is he aware that the ordinary folk of Britain will be the losers, and that whatever the outcome of the decision, whether it be imposed upon us by the EEC or otherwise, the financiers and speculators will be the people who benefit? It is no use his right hon. Friend the Prime Minister lecturing the trade unions about small wage increases, 1847 before leaving for Bonn yesterday, when massive profits will be made by this move.

§ Mr. Barber
On the hon. Gentleman's first point, it is the case that for all practical purposes there will today, as a result of the action we have taken, be virtually no difference concerning ordinary commercial transactions compared with the position yesterday.
Regarding the other matters raised by the hon. Gentleman, this only stresses the point which has been put forward on many occasions by the right hon. Member for Leeds, East (Mr. Healey) and by myself, and on which we are at one; namely, the great importance of getting ahead as fast as we can to produce a better and more sensible international monetary system.