HC Deb 11 November 1976 vol 919 cc634-6
2. Mr. Peter Morrison

asked the Chancellor of the Exchequer by how much the value of the £ sterling has fallen since he took office.

The Financial Secretary to the Treasury (Mr. Robert Sheldon)

Sterling has fallen by 27.3 per cent. in terms of the United States dollar and by 33.6 per cent. in effective rate terms since 8th February 1974.

Mr. Morrison

Is the Minister aware that I am disappointed that the Chan. cellor did not answer this Question? Will he make perfectly clear to those 100 of his right hon. and hon. Friends who yesterday signed an Early-Day Motion deploring further cuts in public expenditure that the£ sterling is bound to drop further unless such public expenditure cuts are announced shortly?

Mr. Sheldon

The hon. Gentleman may have his own views on that subject, but I think that most people take comfort from the fact that sterling has been pretty strong for the past few days. The hon. Gentleman sees one solution only to the problem of the fall in the value of sterling. Other and better commentators, if I may say so, see the fall in sterling as a valid consequence of the high level of inflation, which goes back some years.

Mr. Gould

Will my hon. Friend say what impact he expects the increase of 33.1 per cent. in unit labour costs last year will have on the exchange rate this year?

Mr. Sheldon

The precise relationship is, of course, a matter for some speculation, but, clearly, there is this relationship—this effect—between the rates of inflation and the decline in the exchange rate. However, at the end of it all what will settle the level of sterling is the value that people put on the prices that they pay for the goods that we export and the goods that are imported into this country.

Whatever Governments may do, it will have a much smaller effect on the final level of sterling than will the factors that I have just mentioned.

Mr. Norman Lamont

Does the Financial Secretary agree that one of the most unfortunate effects of the fall in sterling is on the nationalised industries which have foreign currency borrowings? Does he agree, therefore, that it is time that the exchange guarantees were stopped, and also the practice of nationalised industries borrowing such large amounts of foreign currency?

Mr. Sheldon

The hon. Gentleman should take into account the fact that when nationalised industries borrow in foreign currency they must take account of the different interest rates that are payable. The nationalised industries make their own decisions, and it would be wrong for the Government to intrude excessively upon those decisions.