Exchange Rate

HC Deb 01 April 1976 vol 908 cc1549-51

1. Mr. Tim Renton

asked the Chancellor of the Exchequer whether he is satisfied with communications between the Treasury and the Bank of England with regard to responding to exchange fluctuations.

5. Mr. Cronin

asked the Chancellor of the Exchequer what is his present policy with regard to the parity of sterling.

The Chancellor of the Exchequer (Mr. Denis Healey)

I confirm that I am well satisfied with communications between the Treasury and the Bank on these matters. As to exchange rate policy, I refer the hon. Gentleman and my hon. Friend to the account given by my right hon. Friend the Prime Minister in the House on 11th March.

Mr. Renton

I appreciate the difficulty of managing a floating currency, but will the Chancellor assure the House that it is being done without unnecessary strain either on our own foreign exchange reserves or on the co-operative arrangements with other central banks?

Mr. Healey

I am grateful for the hon. Gentleman's question. Our policy is governed, and will continue to be governed, in line with the letter of application to the International Monetary Fund and our pledges under the Rambouillet accord, and the IMF guidelines agreed in Jamaica for countering erratic fluctuations in the exchange market. I can assure the hon. Gentleman that as we have acted in accordance with these rules the loss to our reserves has been very much less than that of certain other countries whose currencies have been under pressure in recent months.

Mr. Jay

Will my right hon. Friend convince his fellow Finance Ministers abroad that it will never be possible in the foreseeable future to maintain a system of fixed exchange rates between a number of trading economies? If he can convince them of that we shall avoid a great deal of trouble and nonsense.

Mr. Healey

As I think my right hon. Friend knows, I have made this point repeatedly at the International Monetary Fund and to my colleagues in the European Council of Finance Ministers. I have a feeling that after recent events there is much more agreement with the line that I have been taking than there was perhaps a month ago.

Mr. David Howell

After the last depreciation, a few weeks ago, the Chancellor denied firmly that the Bank of England had been selling sterling on a falling market, but in view of the evidence that the market would have supported the pound at $1.9385, the apparent pressures that continued after that level was reached and the general doubts about their origin, does not the Chancellor owe us a slightly fuller explanation of what went on?

Mr. Healey

I certainly do not. The hon. Gentleman should know that it has never been the practice of Chancellors of the Exchequer to comment on details of intervention policy. I can tell the House that there has never been any criticism in any international body, including the last meeting of the European Finance Ministers, of the way in which monetary authorities in Britain have handled pressure on the pound in recent months.

Mr. Powell

What reasons has the Chancellor for thinking that the fluctuations of the exchange rate are less severe with the intervention of the Bank of England than they would have been without it?

Mr. Healey

The evidence of experience over the past year.