HC Deb 12 March 1998 vol 308 cc741-3
9. Mr. Mitchell

If he will seek to achieve a more competitive exchange rate level. [32501]

Mrs. Liddell

The Government want a stable and competitive pound over the medium term, consistent with the objective of price stability. The only sure path to long-term exchange rate stability is through sound macro-economic policies.

Mr. Mitchell

Yet is it not obvious to everyone, except four blind academics and ex-academics on the Monetary Policy Committee who have no contact with the real world, that the pound is substantially overvalued as a result of high short-term interest rates here, the deliberate depreciation of the deutschmark and the devaluation of Asian currencies? Does my hon. Friend agree that a 25 per cent. loss of competitiveness for manufacturing, which provides 60 per cent. of our exports is, over a short term, not stability but instability that will lead to depression and deflation later this year?

Mrs. Liddell

As I told my hon. Friend on 17 February when I wrote to him on the matter, more jobs are lost as a consequence of instability. I in no way minimise the concern of British exporters over the strength of the pound, but the strength of the pound is a consequence of a variety of different factors. I return to the point that I have made previously to my hon. Friends—that it is important that Britain has economic stability so that companies can develop policies that make them truly competitive across the board.

Mr. Ian Taylor

One of the factors that will influence the exchange rate is the fiscal management of the UK economy. Does the Minister accept that one of the key factors is how credible our entry into the European monetary union will be at some point in the future? Will she urge the Chancellor, in his Budget next week, to set out a much clearer timetable, with an unequivocal commitment to entering monetary union, to allow the markets to prepare—and British industry to prepare so that it does not lose competitive advantage to a currency that will be used in 80 per cent. of our EU home market?

Mrs. Liddell

That is an interesting question from the hon. Gentleman. I see that he is not wearing his European presidency tie today, which is perhaps unfortunate. My right hon. Friend the Chancellor made perfectly clear the five key tests that should be applied to ensure that if we decide to enter a single currency, we do so when that would be in Britain's best interests. The Government's present priority is to ensure that British industry prepares for 1 January 1999, because it looks as though there will be a euro zone and, because of the laxness of the Conservative Government who made the single currency the subject that dare not speak its name, we now have a job to do to ensure that British companies do not lose competitive advantage.

Mr. Skinner

Does my hon. Friend agree that, during the past 18 years, Britain lost 40 per cent. of its manufacturing base, and that hardly any of that could be attributed to the high pound? Most of it was due to the fact that the Tory Government deliberately set about reducing the manufacturing base by closing down the shipyards, the pits and the steel industry. It is nonsense for those industrialists to say that they cannot make the profits they want, first, because they are paying the workers too much—and they are against the minimum wage—and, secondly, because of the high pound.

Most manufacturers, but not all, also benefit from buying cheap imports as a result of the value of the pound. Hardly any British manufacturer does not gather in imports. It is all about swings and roundabouts. The simplistic argument of my hon. Friend the Member for Great Grimsby (Mr. Mitchell) and some Conservative Members that devaluing the pound will solve everything, or words to that effect, is the biggest load of nonsense ever.

Mrs. Liddell

Needless to say, I agree with my hon. Friend. The attitude of Conservative Members the other night to the national minimum wage, to which my hon. Friend refers, was interesting. The Government's policies are about stability and allowing companies, families and households to plan for the long term in a way that was denied to them during 18 years of Conservative government.