Exchange Rates (Hansard, 31 October 1996)

8. Mr. Alan W. Williams
To ask the Chancellor of the Exchequer what has been the percentage change in the value of the pound (a) against the deutschmark, (b) against the dollar and (c) against the basket of international currencies since September 1992. [318]

§ Mr. Kenneth Clarke
Between 1 September 1992 and 24 October 1996, sterling has fallen by 13 per cent. against the deutschmark, 20 per cent. against the dollar and 12 per cent. on an ERI—that is a basket of currencies—basis.

Mr. Williams
Does the Chancellor recognise that, as has been shown again by Labour's 28-point lead in the latest opinion poll, the people of this country realise that 778 the recovery has nothing to do with the Government's policies, but is due to the devaluation that followed black Wednesday?

§ Mr. Clarke
That peculiar theory is obviously held in more quarters than I had appreciated. The idea that all one has to do to achieve economic success is to devalue one's currency has been disproved over and over again by successive Labour Governments. Of course, in the short term that devaluation gave us a competitive advantage, but it might well have given rise to higher inflation and led to the sort of disasters that we had when Labour was in power. My right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) acted quickly. He put in place a firm inflation target and a framework for monetary policy, which I have since strengthened to concentrate on delivering that target. We went in for tight fiscal policies to keep the public finances under control and we kept the competitive advantage that came from the devaluation by taking the right economic measures here. We were opposed all the way by the Opposition, who would have turned the devaluation into the sort of fiasco that we saw over and over again when Labour was last in power.

§ Mr. John Townend
Is not the Government's performance in dealing with the devaluation unique? This is the first time that devaluation has been followed by sustained low inflation. Is not the success of the Government's monetary policy borne out by the fact that, in recent months, the pound has been rising?

§ Mr. Clarke
I agree with my hon. Friend. This is the first time that we have kept the competitive advantages of a devaluation. We took the tough measures that were necessary to do so, despite Labour's opposition. Now the pound is strengthening strongly. It is still not back—but at an acceptable level—because it is just getting back to where it was 18 months to two years ago. That is because of confidence in the international markets about the long-term stability and prosperity of the United Kingdom economy.

§ Mr. Gordon Brown
Although the Prime Minister told us in 1992 that the pound would replace the deutschmark as the strongest European currency, will the Chancellor confirm that, in an astonishing revelation this afternoon, he had to admit that we are now behind France and Germany in national income, that we have been behind France and Germany for years under his Government, and that our best hope is to catch up with France and Germany not now or next year, but many years from now? What is left of the Government's claim that Britain is the enterprise centre of Europe? Will the Chancellor confirm that we are in the bottom half of the European league, and that that is the result of 17 years of Conservative government?

§ Mr. Clarke
The right hon. Gentleman aspires to be a Chancellor of the Exchequer who attends meetings of the G7 Finance Ministers. He has been shadowing the job for three years, yet he has just discovered that the Germans and the French have bigger economies than ours. That has been the case for many years under successive Governments. The failure of the United Kingdom compared with other countries, under Labour 779 Governments in particular, led to our being overtaken in the post-war world. In the 1980s and 1990s we have had faster growth than France or Germany. We are fast catching up with them. The right hon. Gentleman is so out of touch with the real world that he does not realise that his policies would take us back to the comparative decline from which, under a Conservative Government, we have at last escaped.