§ Sir Keith Joseph
The present exchange rate must affect our manufacturing competitiveness. But a strong exchange rate should help to contain inflation, and success on that front is important for future manufacturing production.
§ Sir. K. Joseph
The Chancellor of the Exchequer is certainly extremely well aware of the effect of the exchange rate upon manufacturing industry. But I repeat that to alter by Government action the level of the exchange rate, even if it were practicable, would endanger the priority objective of reducing inflation, which is equally if not more important for manufacturing industry.
§ Mr. Robert Sheldon
Is the Secretary of State not aware that in one month last 919 year imports of finished manufactures actually exceeded exports of finished manufactures, and that this situation is likely to deteriorate further this year? Will he bear in mind that his monetary policy—to which he adheres and which is responsible for the failure to instruct the Bank of England to intervene in the exchange rate—is a very heavy price to pay for the certainty of the damage that it is doing to our competitiveness and to the export possibilities for British industry?
§ Sir K. Joseph
There is a lag in all these things. I do not want to put too much weight upon the performance of British manufacturing industry at present, but the fact that British manufacturing industry is maintaining and even increasing the volume of its exports, while the volume of imports did not increase so much last month, is encouraging. I repeat that to let inflation rise further, which is what would be involved by seeking to lower the exchange rate, would be more damaging still to British manufacturing industry.
§ Mr. Viggers
Does the Secretary of State agree that Germany and other countries have shown that it is possible to prosper with a strong exchange rate, and that this can enable the benefit of our prosperity to be spread by enabling higher wages to be paid to our labour, whereas the low exchange rate is needed only if one is concentrating on cheap labour?
§ Sir K. Joseph
I agree with the gist of what my hon. Friend has said. It is true that good manufacturing companies are finding the high exchange rate an intense stimulus to their efficiency.
§ Dr. John Cunningham
Is there not a widespread and strongly held view throughout British industry that sterling is overvalued? Has not the Secretary of State been told this by a large number of industrial organisations, including the footwear industry, the textile industry and, most recently, the chemical industry? For the first time for many years, record import levels of chemicals are coming into the British economy, which is surely a disgrace. The Minister's answer would be acceptable if inflation were falling and output were increasing, but is not the reverse the truth in both cases?
§ Sir K. Joseph
As I have said before, there is a lag in these matters, and 920 inflation is still reflecting the loss of control of the money supply by the Labour Government in their last year. I repeat that manufacturing industry recognises that the defeat of inflation, to which the exchange rate contributes, is in its own highest interest.