HC Deb 16 January 1986 vol 89 cc1202-3
11. Mr. Freeman

asked the Chancellor of the Exchequer when he next plans to meet Finance Ministers of the Group of Five nations to discuss international monetary affairs.

Mr. Lawson

The Finance Ministers of the Group of Five nations meet from time to time for this purpose.

Mr. Freeman

Does my right hon. Friend agree that since the Finance Ministers of the Group of Five last met in New York four months ago, their plan to reduce the value of the dollar has worked, the dollar has weakened against sterling by about 5 per cent., and the rate with the deutschmark has changed by about 10 per cent. to a rate of approximately DM 3.50 to the pound? Does that give him confidence for his forthcoming meeting with the Group of Five Ministers?

Mr. Lawson

My hon. Friend makes a good point. Certainly before the G5 meeting the general view of those in industry was that, whereas the dollar was too high and could well come down, the mark could go up a little against sterling. Since the Plaza meeting sterling has risen 5 per cent. against the dollar and fallen by 9 per cent. against the deutschmark.

Mr. Robert Sheldon

Is it not clear that Western countries depend on the present buoyant economy of the United States? Should not Germany and Japan, let alone ourselves, do more to stimulate our economies, and so play our part in a continued resurgence of activity in western Europe, America and Japan?

Mr. Lawson

It is possible to exaggerate considerably both the extent to which growth in the world economy is dependent on growth in the United States, and the extent to which that has slowed down. That growth has slowed down from an unsustainable rate, but it is continuing in the United States and quickening in the Federal Republic of Germany. One would certainly like to see the Japanese pursue a more generous policy than at present.

Mr. John Browne

Does my right hon. Friend accept that the international economy is being severely hurt by an international trade war, which this time is being carried on by competitive devaluations of currencies? Does he further accept that such a trade war could be stopped if we were to move towards fixed exchange rates and honest international money, that is, if there were some restoration of gold convertibility on a gold exhange standard? When he meets his G5 friends, will he please undertake to consider the restoration of stability in world monetary and financial affairs, in the hope that that will reflect on the world economy in terms of genuine trade growth?

Mr. Lawson

I certainly take note of what my hon. Friend said. He will not expect me to answer all his points. I am sure that the strength and durability of the world recovery since the world recession in the early 1980s, and the growth of world trade that has accompanied it, depend on the fact that all the countries involved are pursuing anti-inflationary, sound money policies.

Mr. Blair

Does the Chancellor of the Exchequer agree that now is the last time to be complacent about the international economy? Does he not realise that it still faces the terrible, pressing problems of world debt and a potential decline in economic growth? Will he assure us that when he meets the Group of Five he will be at the forefront of calls for a co-ordinated cut in interest rates and policies of expansion, and will not indulge in absurd notions of leaving those matters to market forces?

Mr. Lawson

I can assure the hon. Gentleman that the Finance Ministers of the Group of Five are fully seized of the problem of international debt and of the need to maintain sound anti-inflationary polices, both for their own sake and to ensure a continuation of world recovery.