Devaluation (Hansard, 12 November 1992)

§ 3. Mr. Betts
To ask the Chancellor of the Exchequer what estimate he has made of the future effect on United Kingdom inflation of the devaluation since he suspended the United Kingdom's membership of the exchange rate mechanism.

§ The Paymaster General (Sir John Cope)
As my right hon. Friend said just now, he will be publishing a revised forecast of prospects for inflation in the autumn statement in the usual way.

§ Mr. Betts
Given the Chancellor's previous statements of confidence about the level of inflation—a confidence which is not shared by many private sector analysts, including the London Business School—why do the Government wish to rejoin the ERM? Do they intend to rejoin the ERM before or after the Danish referendum?

§ Sir John Cope
As the hon. Gentleman knows, we pay tribute to the ERM, for the way in which it has helped us to get inflation down. That is part of the reason why we will re-enter the ERM when times are right.

§ Mr. Butterfill
Will my right hon. Friend confirm that the recent easing of monetary policy is by no means inconsistent with a policy of keeping inflation low, provided that we maintain controls over public expenditure, particularly revenue expenditure?

§ Sir John Cope
Indeed, and we shall hear more about that later today. My right hon. Friend the Chancellor has reaffirmed that he is not prepared to take risks with inflation.

§ Mr. Darling
Notwithstanding what the Chancellor said about the 2 per cent. rise in input prices last month, does the Minister not accept that, although there is spare capacity in the United Kingdom economy, our economic base is so weak that, unless remedial action is taken, there will be a substantial risk that inflation will rise beyond the upper estimate of 4 per cent. which the Chancellor gave? Can we take it from the Minister's comments about the ERM and his tribute to it that the Government regard a managed exchange as being dead?

§ Sir John Cope
On the contrary, I said that we would rejoin the ERM when times were right. As we have made clear before, that is what we shall do. There are still strong deflationary pressures in the pipeline.