HL Deb 01 February 1982 vol 426 cc1119-20

2.50 p.m.

Lord Harris of High Cross

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether they have considered the merits of repealing the Exchange Control Act 1947, in view of the damaging uncertainties caused by periodic speculation about the restoration of control over international capital movements.

The Minister of State, Treasury (Lord Cockfield)

My Lords, all member states of the European Community are required by the Council directive of 21st March 1972 to be able to act, where necessary, on capital flows without further enabling measures. We therefore need to keep the powers in the Exchange Control Act 1947 on the statute book.

Lord Harris of High Cross

My Lords, I thank the noble Lord for that Answer. Leaving aside the specific and, I think, relatively narrow issue of complying with the EEC directive, may I ask this further question: Would the noble Lord and, indeed, the Government attach no weight to the view that retention on the statute book of the full panoply of the 1947 Exchange Control Act leaves the door wide open to periodic disruptive and even mischievous speculation that full-scale control might be reimposed over both direct investment and portfolio investment at some stage between now and the next election, whenever that may be?

Lord Cockfield

My Lords, compliance with directives of the EEC is not a narrow or technical point at all. Secondly, on the point of substance, my right honourable and learned friend the Chancellor of the Exchequer has said on a number of occasions that we had no intention of reintroducing exchange control. So far as the question of speculation and damaging uncertainty is concerned, there is no support for that view in the figures. On the contrary, looking at portfolio investment (which is the most sensitive item from that point of view) in the first quarter of 1981 the outflow was £1.3 billion, in the second quarter £1.1 billion and in the third quarter it fell even further to £0.6 billion.

Lord Jacques

My Lords, would the noble Lord bear in mind that since exchange controls were removed there has been an outflow of capital of £13,000 million and that the inflow has been only £7,000 million, and that this huge gap is having an upward pressure on interest rates which are crippling even our most efficient firms and discouraging investment in home industry?

Lord Cockfield

My Lords, the noble Lord's conclusions are quite unwarranted. The net outflow is simply the counterpart of the very large surplus we have earned on the balance of payments—a thing in which I think noble Lords opposite would take as much satisfaction as we ourselves do. Had there not been this outflow of sterling, the exchange rate would have been much higher than it is and that would have done considerable damage to British industry.

Lord Nugent of Guildford

My Lords, is my noble friend aware that, whatever fear there may be of dramatic change if there was a change of Government in the future, under the present Government there is general confidence that the benefits of a free market in this particular respect are well understood and that there is every confidence that the present Government will not change it?

Lord Cockfield

My Lords, my noble friend is entirely right, and the points he makes are of great importance.