§ 3. Mr. Adleyasked the Chancellor of the Exchequer what was the highest rate reached by the £ sterling against the United States $, after the 1967 devaluation reduced the rate from $2.80 to $2.40; and on what date this rate was reached.
§ 13. Mr. Michael Lathamasked the Chancellor of the Exchequer what is the current exchange rate for the £ sterling against the United States $; and what was the equivalent figure on the day on which he assumed office in March 1974.
§ The Financial Secretary to the Treasury (Mr. Robert Sheldon)The highest rate reached against the United States dollar since 1967 was $2.6515 on 9th March 1972. On 5th March 1974 the opening rate was $2.2775, and at noon today the rate was $1.7179.
§ Mr. AdleyI thank the Financial Secretary for showing the House that the pound is always strong under a Conservative Government. Will he confirm, however, that the real fall through the devaluation of the pound since February 1974 under this Government has exceeded even the devaluation of Stafford Cripps? Will he say why Labour Governments always cause a devaluation of our currency?
§ Mr. SheldonI do not think that anyone can be particularly proud of the Smithsonian Agreement on exchange levels as it was fixed for Britain. The subsequent reaction was that it was clearly far too high. The exchange rate is affected by the level of inflation appertaining in this country at present, and unquestionably the Opposition share a great measure of responsibility for that. The exchange rate must ultimately reflect what those abroad think of our current inflation difficulties and the steps that we are taking to overcome them.
§ Mr. LathamDoes the right hon. Gentleman agree, however much he tries to get out of it, that the figures represent an eloquent comment on the record of the Government? Is it currently the Government's policy to hold the exchange rate down?
§ Mr. SheldonThe Government's current policy must be to reflect the view that outside holders of sterling have of our economic prospects. In the past few weeks we have seen an improvement in the prospects for the country, and that is reflected in the movement of the exchange rate itself.
§ Mr. GouldDoes my right hon. Friend recall the disastrous effects on our competitiveness in exports and on our balance of trade after the Bank of England's action in 1972 of pushing up the exchange rate when our costs were rising faster than those of our competitors? Should we not take that lesson to heart in the present situation?
§ Mr. SheldonI am sure that my hon. Friend is right to draw attention to the unrealistic exchange rate pursued by the previous Conservative Government, a rate which was reversed following the reassessment that they eventually made. These are factors which obviously have to be taken into account, although the main decision both about our competitiveness and the levels of our inflation are inevitably made by our overseas partners. It is they who determine principally the exchange rate of the pound against other currencies.
§ Mr. PowellIs there ever any necessary relationship between the well-being, prosperity and economic progress of a country and the number of units of its currency which exchange for US $1?
§ Mr. SheldonMost people would agree that if the country is progressing satisfactorily and is expanding production and productivity, that would be reflected in its exchange rate. The rate is a reflection of these attitudes over a sufficiently long period.