£ Sterling (Hansard, 9 December 1982)

§ 5. Mr. Campbell-Savours
asked the Chancellor of the Exchequer if he will take action to adjust the value of the £ sterling so as to increase competitiveness.

§ 13. Mr. James Lamond
asked the Chancellor of the Exchequer what is the present valuation of the £ sterling against the United States dollar; and what was its valuation on 3 May 1979.

§ The Economic Secretary to the Treasury (Mr. Jock Bruce-Gardyne)
The value of the pound against the United States dollar this morning was $1.6130. On 3 May 1979 its value was $2.0759. The sterling effective index stood at 85.8 this morning against 86.3 in May 1979. The experience over many years is that the United Kingdom cannot solve its basic problems of competitiveness by depreciation. This must depend on increased productivity, more realistic wage settlements and improving the quality of the goods and services that we produce.

§ Mr. Campbell-Savours
Is the devaluation of a currency that is over valued a competitive devaluation?

§ Mr. Bruce-Gardyne
I am not sure that there is much point in arguing about the precise definition of devaluation. If we look back at our experience over many years we find that, for instance, when the Labour Party devalued the currency in 1967, within five years any competitive advantage had disappeared. Between 1973 and 1976 there was a 25 per cent. reduction in the international value of sterling, but no gain for competitiveness.

§ Mr. James Lamond
Does the Minister recall the halcyon days when his right hon. Friend the Prime Minister used foolishly to boast that the high value of the pound against the dollar was a measure of the confidence that people abroad had in her Government? Now that there has been a 19 per cent. slippage in that value do we take it that the standing of the right hon. Lady's Government in the United States is as low as it is here?

§ Mr. Bruce-Gardyne
The standing of my right hon. Friend's Government in the United States is extremely high, as the hon. Gentleman would know if he ever went near that country. A variety of different influences applies to all internationally traded currencies. With regard to how the pound stands, inevitably expectations about oil prices. for example, are liable to lead to influences on our exchange rate. It is vital that we show, as we do, our 967 commitment to the elimination of inflation, which has been the great bugbear of our economy, is unwavering and will be continuously and effectively pursued.

§ Sir William Clark
Does my hon. Friend agree that the hon. Member for Workington (Mr. Campbell-Savours) is asking the Chancellor to adjust the exchange rate? Does he further agree that if there were a fear of a Labour Government, the Labour Chancellor would not have to be asked to adjust the devaluation rate, as the pound would plummet?

§ Mr. Bruce-Gardyne
I am sure that my hon. Friend is right. Fortunately, that possibility is widely deemed to be so remote that the markets are prepared to discount it.

§ Mr. Shore
Is it still the policy of the Government, as the Chancellor informed us in his statement a fortnight ago, to leave the exchange rate of the pound to the market? If that is the Government's policy, can the Minister explain why a week or so ago the Bank of England intervened in the markets to push up the base rate to the banks to 10 per cent? Are we to understand from that behaviour that whenever there are significant movements on the foreign exchanges the Government intend to respond by further increases in the bank base rate?

§ Mr. Bruce-Gardyne
I am afraid that the right hon. Gentleman has not clearly understood what has been happening in the markets. My right hon. and learned Friend the Chancellor has frequently made it clear that we do not have, have never had and would never have an exchange rate target. The performance of the exchange rate is one of the indicators to which we have regard in assessing the relative tightness or laxity of monetary policy.
Ten days ago the market moves led to a lifting in bank base rates, with which the Bank of England acquiesced. It was not a question of the bank making the movement. If the right hon. Gentleman does not understand that, I suggest that he pays closer attention to what happens in the markets.

§ Mr. Richard Wainwright
In order to assist in a more realistic world-wide value of sterling, will the Treasury ask the public authorities to consider making the earliest possible repayment of their foreign debts, which total more than £11 billion?

§ Mr. Bruce-Gardyne
As the hon. Gentleman knows, since the Government took office we have repaid a great deal of foreign debt on public account, but we have done so wherever it has been profitable so to do. That should be the bench mark by which we operate, not some idea of aiming at a particular figure. The point is that the decision to pay off existing debt or even to incur new debt depends on the profitability of the operation. That is the basis on which we have operated and shall continue to operate.