Exchange Rate (Hansard, 10 July 1997)

§ 9. Mr. MacShane
To ask the Chancellor of the Exchequer what representations he has received on the exchange rate; and if he will make a statement. [6185]

§ The Economic Secretary to the Treasury (Mrs. Helen Liddell)
My right hon. Friend has received a number of representations concerning the exchange rate. The Government want a stable and competitive pound over the medium term, consistent with the objective of 1063 price stability. The focus of policy will be on achieving the low inflation and sound public finances that are the necessary conditions for sustained exchange rate stability.

§ Mr. MacShane
Has my hon. Friend had a chance to study the attempts in the House in the past year to get the previous Government to take action on the ever-increasing value of the pound, which has done so much damage to steel and other exporting industries? Is she aware that the inheritance of the Tory high pound might benefit Conservative Members such as the shadow Chancellor, who can now renovate his chateau in Normandy much more cheaply, but does immense damage to our exporting industries? Does she share my concern that the pound is too high? It should be stable, but at a lower rate.

§ Mrs. Liddell
I share my hon. Friend's concern about the impact of the high pound on manufacturing and other industry. He makes the most apposite point in drawing attention to the previous Government's failure to tighten monetary policy effectively. We are living with the consequences of a Government who were more concerned with their own Back Benches than with governing the country.

§ Mr. Viggers
Have the Government received representations about the exchange rate from companies with substantial foreign earnings, particularly from those who would have been affected by the abolition of the foreign income dividend? Is it true that the Government are about to announce the most humiliating U-turn and scrap the Budget measure that would have abolished FIDs?

§ Mrs. Liddell
I regret the fact that the hon. Gentleman did not find it possible to be in the House on Friday when my hon. Friend the Paymaster General referred to those matters. The Government have no intention of making any U-turns. We pursue the policies that we were elected on in the general election; I realise that that is something Conservative Members find very difficult to accept.

§ Kali Mountford
As early as February this year, it was predicted that there was only a one in four chance of our meeting the inflation target, yet the previous Government did nothing about it. Will my hon. Friend comment on the implications of that in the current economic situation?

§ Mrs. Liddell
My hon. Friend makes a valuable point. Six times in a row, the previous Government were warned about the inflation target and, six times in a row, they chose to go for narrow political considerations. That is why my right hon. Friend the Chancellor of the Exchequer is determined to put the setting of the inflation rate on a firm long-term footing. That is a key way of ensuring stability in the economy and an exchange rate that is acceptable in the medium and long term.