HC Deb 28 April 1977 vol 930 cc1467-9
4. Mr. Gow

asked the Chancellor of the Exchequer when he next plans to meet the managing director of the International Monetary Fund.

Mr. Joel Barnett

My right hon. Friend is in Washington attending meetings of the IMF Development and Interim Committees, at which Mr. Witteveen, the IMF Managing Director, will also be present.

Mr. Gow

Does the Chief Secretary recall the letter that his right hon. Friend sent to Dr. Witteveen on 15th December last when he stated that an essential element of the Government's strategy was a substantial and continuing reduction in the share of resources required for the public sector? In order to implement that strategy, what further proposals does the Chief Secretary have for ensuring that that substantial reduction will take place?

Mr. Barnett

I recall the letter very well. We have clearly indicated in the public expenditure White Paper the share of resources taken by the public sector. We have no further plans in that direction.

Mr. Skinner

Will the Chief Secretary tell his right hon. Friend when he returns that some of us are still more than a little anxious about the IMF conditions and the lunatic policy that continues to create a massive dole queue and is causing prices to escalate and wages to be held back, except for a few of those top industrialists who are being paid confetti money? When his right hon. Friend returns, will my right hon. Friend tell him that the result of this in the country generally means that we have got to change our policy if there is to be any hope at all of a future Labour Government?

Mr. Barnett

I do have occasional opportunities to tell my right hon. Friend a number of matters, and I shall certainly ask him to take note of my hon. Friend's comments. However, I am bound to say that whether or not we wrote a Letter of Intent to the IMF, the policies we are implementing are, we believe, the right policies for creating the right kind of stable situation.

Mr. Skinner

My right hon. Friend is cutting his own throat.

Mr. Barnett

I confess that cutting my throat is not something that I normally enjoy.

Mr. Skinner

They are cutting my right hon. Friend's throat—I am not.

Mr. Barnett

My hon. Friend and I have a very happy relationship. It depends on the fact that we often disagree with each other fundamentally. I disagree with him on this matter very strongly. I do not believe that changing the economic strategy in this way that he suggests would in the long term help reduce the dole queues or prices.

Mr. Budgen

When the Chief Secretary next speaks to anyone from the IMF and discusses the sterling exchange rate, will he tell the IMF whether he agrees with today's report from the London Business School, which advances the argument that the most efficient way to reduce inflation is to allow the sterling exchange rate to rise under market pressures? If he agrees with that argument, will he please explain both to the House and to the IMF why the Bank of England continues to intervene in order to hold down the exchange rate?

Mr. Barnett

I read almost everybody's forecasts, recommendations and advice. I view them all, including those of the hon. Gentleman, with the same sort of scepticism. The Treasury's forecasts in these matters are frequently better than some of the others, including forecasts on the borrowing requirement. The hon. Gentleman knows better than to suggest that there is a simple solution to this problem. The question is one of a very fine balance, as my right hon. Friend the Financial Secretary was saying a little while ago.

There are strong arguments on both sides about what should happen to the exchange rate. No doubt the hon. Gentleman will have read other views by other economists—and the view of my hon. Friend the Member for Southampton, Test (Mr. Gould)—on what should happen to the exchange rate. I believe that we are pursuing the right policy in maintaining a stable exchange rate.