§ Sir G. Howe (by Private Notice)asked the Chancellor of the Exchequer if he will make a statement about the condition of the pound sterling.
§ The Chief Secretary to the Treasury (Mr. Joel Barnett)Since the House rose, sterling has been under intermittent pressure, mainly because the markets are nervous about the outcome of the discussions about counter-inflation policy, and in part because the uncovered interest rate differential had narrowed over recent weeks. Recent statements by those involved, and the rise in the minimum lending rate on Friday, have apparently had an effect. I am glad to say that the foreign exchange markets have been quieter so far today.
§ Sir. G. HoweThe House will understand the reason for the Chancellor's absence. I understand that he is in Brussels and realise that he has a number of pressing engagements from which he must choose in present difficult circumstances.
Will the right hon. Gentleman convey to the Chancellor that the whole House, like the whole country, is deeply concerned, as it must be, about the continued decline in the value of our currency? For that reason, we are most anxious that the nervousness to which the Chief Secretary rightly referred, created by the present series of talks with union leaders, should be brought to a speedy, realistic and sensible conclusion at the earliest possible opportunity. Does the right hon. Gentleman recognise that we shall start moving in the right direction only if the Government—and that means the entire Government—are prepared to spell out the whole truth about the gravity of our economic situation and, above all, are prepared to make the necessary fundamental changes in their central economic policy? That must be done by allowing resources to shift back into profitable industry, and, most important of all, as the Chief Secretary knows very well, by the Government themselves ceasing to believe, and behaving as though they believe, that they can for ever go on borrowing £1 out of every £5 that they are spending.
§ Mr. BarnettI very much doubt whether the statements or policies of the 29 right hon. and learned Gentleman would have the slightest effect, other than adverse, on the state of the pound. The chance of bringing the negotiations with the trade unions to a speedy, satisfactory and successful conclusion will be better under my right hon. Friend the Chancellor than it would be as a result of any proposals emanating from the right hon. and learned Gentleman. As I have already said, the negotiations are going well and we expect that they will come to a satisfactory conclusion.
§ Mr. AtkinsonWill my right hon. Friend confirm that it was London dealers who initiated the unloading of sterling, thus reversing the Government's strategy on the minimum lending rate? Does he accept that their purpose was to pressurise the Government into concluding a 3 per cent. agreement with the trade unions and to reverse the policy of reducing lending rates? Will he assure the House that it is not the Government's policy to increase lending rates any more and that it is not their policy to make further cuts in public expenditure?
§ Mr. BarnettThe Government's economic strategy is precisely the same as it was when my right hon. Friend the Chancellor announced it in his Budget Statement. I do not accept that the London dealers started this run on the pound. The real problem is to get the rate of inflation down. I am happy to say that the figures in that regard are very encouraging. It would be helpful if some people took notice of those figures.
§ Mr. PowellDoes the right hon. Gentleman agree that this fall in the exchange rate of the pound does not represent a decline in our real terms of trade, and that in itself it cannot be a cause of inflation?
§ Mr. BarnettThe present decline in the exchange rate of the pound is overdone in our view. But at the end of the day we shall have a strong currency only when we have a strong economy. I believe that the Government's economic policy will bring us to that situation.
Mr. Mark HughesWill my right hon. Friend ensure that my right hon. Friend the Chancellor takes due steps to see that regional investment is not adversely affected by an increase in interest rates 30 domestically, even while it may be necessary for international reasons?
§ Mr. BarnettI have no reason to expect that the policy that has been carried out by this Government, including what has happened in the past few days, will have any serious effect on regional policy.
§ Mr. PardoeDoes the right hon. Gentleman accept that, rather than trying to blame each other for the fall in the value of the pound, it would be rather more helpful if right hon. and hon. Members came to terms seriously with the fact that the pound has continued inexorably to fall under Governments of both Conservative and Labour persuasions ever since the Smithsonian agreement? Does the right hon. Gentleman recognise that chasing economic wills-o'-the-wisp will not restore confidence, that what the world needs is reassurance that this country knows how to govern itself, and that that requires a new political settlement?
§ Mr. BarnettI appreciate that the hon. Gentleman has to criticise both sides of the House. I believe that the world recognises that a statisfactory agreement with the trade unions, which I believe we shall achieve, and bringing down the rate of earnings inflation and price inflation, with the sort of helpful statement we have had from trade union leaders in recent days, is the best way for us to get our economy right.
Mr. HellerWhat sort of inquiry, if any, is the Treasury making into the ridiculous matter of hot money that comes into the country quickly and flows out equally quickly every time a strike is declared or a conference decides not to support the 3 per cent. proposals of my right hon. Friend the Chancellor? Is it not time for the whole matter to be seriously examined and for steps to be taken to deal with it, in order that this stupid situation does not arise every time there is such a problem?
§ Mr. BarnettNo, Sir. I do not believe that that is the real issue. It is not the central issue facing the country. It is not hot money or speculators that are the cause of our problem. The real problem we face is the central economic one, and it is no use going off on to side issues.
Mr. HordenDoes the right hon. Gentleman recognise that no statement that he or the Treasury makes will have the slightest effect on the value of the £sterling unless it is accompanied by action, and that that action must incorporate a real reduction in the level of public expenditure? Unless that is done, the state of the pound may well become worse. When does the right hon. Gentleman expect to consult the International Monetary Fund once more?
§ Mr. BarnettI entirely disagree with everything the hon. Gentleman said. What he and his right hon. Friends have been saying is that we should cut public expenditure, but they do not say where, or how it would help to enable us to reach a satisfactory outcome to the negotiations with the trade unions. If we pursued the sort of policy that they suggest the outcome would be disastrous.
§ Mr. SpeakerOrder. We cannot pursue this matter now.