HC Deb 06 December 1979 vol 975 cc594-5

7. Mr. Dalyell asked the Chancellor of the Exchequer what assessment he has made of the effects of his decision to abolish exchange controls.

Mr. Biffen

The abolition of exchange controls will be of benefit to the economy. It removes damaging and unnecessary restrictions on our economic relations with the rest of the world.

Mr. Dalyell

Is not one reason for the collapse of gilt sales and the rise in interest rates in the market, which preceded the rise in minimum lending rate, the final lifting of exchange controls? Is it not an awkward fact that unless a Government are firmly pegging interest rates, exchange controls do not affect the exchange rate as much as they affect interest rates?

Mr. Biffen

The evidence does not support the hon. Gentleman's point. The problems that arose over the monetary markets which led to the establishment of a minimum lending rate of 17 per cent. referred to a period that substantially predated the lifting of exchange controls.

Mr. Woolmer

Is it not true that the abolition of exchange controls and the current high interest rates attract hot money and short-term money into the United Kingdom? What steps does the right hon. Gentleman intend to take to ensure that sterling is not threatened by rapid outflows of money in future?

Mr. Biffen

The best way to provide for an orderly market in sterling in the situation that the hon. Gentleman describes is to maintain the freedom of sterling.

Mr. John Garrett

Has the Treasury yet undertaken a study of the scope for tax avoidance as a result of ending exchange controls? Does the Treasury have any idea of the revenues that will be forgone by the Exchequer as a result of the ending of exchange controls?

Mr. Biffen

Obviously that is a matter that is being kept under close consideration.