HC Deb 17 June 1976 vol 913 cc713-5
1. Mr. Tim Renton

asked the Chancellor of the Exchequer when he next proposes to have discussions with the Managing Director of IMF.

The Chancellor of the Exchequer (Mr. Denis Healey)

I shall, of course, be meeting Dr. Witteveen at the IMF/IBRD annual meeting in October. There are no arrangements for me to meet him before then.

Mr. Renton

Does the Chancellor of the Exchequer accept that short-term dollar borrowings are no answer to the fundamental problem of sterling? Will he therefore use the few months' time that he has bought in seeking longer-term solutions, perhaps in conjunction with the IMF, which will restore sterling to more fundamental health and involve severe limitation of Government borrowings, as the longer action is put off the worse the cure must be?

Mr. Healey

Of course, I do not believe that short-term measures are an answer to long-term problems, but I believe that the standby credit arranged last week has already proved its immense value to the economy, and particularly to the strength of sterling. I intend to ensure that our economy continues to progress over the months to come.

Mr. Atkinson

Will my right hon. Friend confirm that the IMF would raise no objection to the introduction in this country of two-tier borrowing rates? Does he agree that there is no necessity for us to impose upon manufacturers a lending rate that is designed to attract funds from overseas, when the manufacturers themselves are engaged in export activity and are now having to borrow money at between 12 per cent. and 15 per cent., which is a crippling burden on any export-led recovery?

Mr. Healey

I have not sought the views of the IMF on two-tier borrowing rates. As I explained to the House last week, I do not think that in our circumstances they would answer our problems. On the other hand, they would give speculators and financial experts a chance of making uncovenanted gains at the country's expense.

Sir G. Howe

Does the Chancellor of the Exchequer think that the IMF shares the view of the Bank of England that positive steps of a budgetary nature may well be necessary in the coming months? Does the Chancellor of the Exchequer share that view? Will he assure the House that he remains entirely free in his responsibility to the House either to raise taxes or to cut public spending, and to do either or both of those things if it turns out to be necessary in his judgment? Does he recognise the Bank for International Settlements point that this country has now reached the limits of taxable capacity, and that the only tolerable way for him to proceed is by cutting public expenditure?

Mr. Healey

If the right hon. and learned Gentleman had read a front-page article in today's Financial Times he would have seen that he has gravely misinterpreted the views of the Bank of England. If it proved necessary to reduce the public sector borrowing requirement, I would take the necessary steps, whether by raising taxation or by reducing public expenditure. I have already told the House that that is the case.