§ The Chancellor of the Exchequer (Mr. Denis Healey)
The Government's policy for the exchange rate is set out in the reply I gave on 10th November 1977 to my hon. Friend the Member for Lough-borough (Mr. Cronin) and the hon. Members for Eastleigh (Mr. Price) and for Norfolk, South (Mr. MacGregor), in the Letter of Intent to the International Monetary Fund of 14th December 1977.
§ Mr. Gow
May I ask the Chancellor to pay no attention to his right hon. Friend the Chancellor of the Duchy of Lancaster and to some of his hon. Friends below the Gangway who are clamouring for a return to a fixed parity? Will he confirm that the Government have no intention whatever of altering the decision to allow sterling to float freely.
§ Mr. Healey
I cannot undertake to pay no attention to my right hon. Friend's views. I pay very close attention to them, as I pay close attention to the views of all my hon. Friends. The point which the House must recognise is that a fixed exchange rate is impossible in a world of floating rates. The parity is 1721 the relationship between one's own currency and other currencies, and in a world of floating currencies we have no control over the movement of other currencies to which ours is related.
§ Mr. Tapsell
Are Ministers having any success in their commendable efforts to persuade the Economic Committee of the TUC that liberalisation of exchange controls, far from leading to a loss of jobs at home, can—as so many specialised inquiries both here and in the United States have proved—actually help job creation and also the sterling relationship to other currencies?
§ Mr. Healey
I have read a large number of the studies to which, I assume, the hon. Gentleman refers. I notice, for example, that The Banker carried out a poll of 100 leading City firms recently and two-thirds of those questioned thought that the abolition of exchange controls would have very little effect on the exchange rate. I agree with them. One can see that this is true from the behaviour of exchange rates of countries which have no exchange control, such as Germany, Switzerland and Japan.
On the other matter, I presume that the hon. Gentleman is referring to such studies as the Reddaway Report. That report was about the effect of outward investment under a regime of strict exchange controls, and it throws no light whatever on what would happen to investment in this country if there were the sort of liberalised exchange controls to which the hon. Gentleman refers. A more useful precedent here is the effect of the introduction of competition and credit control, at the request of the very same sectors of financial opinion as are now pressing for the abolition of exchange controls. As the hon. Gentleman will know, competition and credit control almost led to the collapse of the banking system in this country.
§ Mr. Ian Stewart
Is it true that the Government have made representations to the United States and other countries that settlements for oil should in future be made in a group of currencies? What would be the implications for the management of the sterling exchange rate if that were the case?