Exchange Rate Mechanism (Hansard, 11 June 1992)

§ 8. Mr. Martin Jones
To ask the Chancellor of the Exchequer when he last met his European counterparts to discuss the operation of the exchange rate mechanism.

§ Mr. Nelson
My right hon. Friend regularly attends meetings of the European Council of Finance Ministers with his Community colleagues. The operation of the exchange rate mechanism has been discussed at a number of past meetings.

§ Mr. Jones
Will the Chancellor say whether a revaluation upwards of the deutschmark within the ERM would be good or bad for the British economy?

§ Mr. Nelson
It is not for my right hon. Friend or for me to comment on prospective movements in exchange rates.

§ Mr. Morgan
Why not?

§ Mr. Nelson
What it is right for the Government to comment on is that we are committed firmly to maintaining our position within the exchange rate parameters, which we have done to the benefit of the country in terms of a sound exchange rate, and reducing the levels of inflation and interest rates.

§ Mr. Renton
Will my hon. Friend confirm that sterling being within the exchange rate mechanism has added considerably to the stability of sterling in the past 18 months? Will he confirm also that it is the Government's wish to enter the narrow band of the exchange rate mechanism in due course? Has my hon. Friend any idea when that might be practicable?

§ Mr. Nelson
We will move in due course to the narrow band at the current central parity of DM2.95 to the pound. In the meantime, it is our firm intention to remain in parity with all the existing currencies within the exchange rate parameters.

§ Mr. Skinner
Why does not the Minister let the Chief Secretary to the Treasury answer this question so that he can make a statement not only about the exchange rate mechanism and whether it will be shifted, but about the principle of the common market in the Maastricht treaty? Let him stand up and tell us. His right hon. Friend the Secretary of State for Social Security has answered—

§ Madam Speaker
Order.

§ Mr. Nelson
My right hon. Friend and I are at one on this issue as, indeed, on all others.

Mr. Winterton
I fully accept that the ERM is an efficient anti-inflationary discipline, but does my hon. Friend accept that if we could react to the health of our economy, with inflation just above 4 per cent., interest rates in Britain could be reduced to 8 per cent. if we were outside the ERM? That would be of immense benefit to manufacturing and to mortgage payers in Britain.

§ Mr. Nelson
I understand what my hon. Friend says, but I do not agree and nor do the Government. Indeed, a strong case could be put that interest rates would have to be higher if we were outside the ERM rather than within it.