HL Deb 15 March 1983 vol 440 cc601-3

2.56 p.m.

Lord Boothby

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 what role, if any, they expect gold to play in the new international monetary system now under consideration by the International Monetary Fund and the central banks.

Lord Trefgarne

My Lords, I understand that neither the fund, nor central banks, have any plans to restore gold to a formal position in the international monetary system.

Lord Boothby

My Lords, arising from that Answer, may I ask the noble Lord whether he is aware that for a century prior to 1914—during which period the French Revolution and the Napoleonic Wars took place—there was no inflation and trade flowed freely across frontiers, entirely due to the fact that gold was the basis of every major currency in Europe? Do the Government realise that the whole world is now suffering from a desperate shortage of liquid reserves, and that gold bullion is one of those reserves and has been for over a thousand years? Are the Government also aware that when the Americans demonitised the dollar, and with it rendered every currency in the world intrinsically valueless, they plunged us all into a deep economic recession, from which we have not yet recovered, and do not look like doing so?

Finally, may I ask the noble Lord whether Her Majesty's Government will now persuade the Americans, and themselves, that the only hope of escape is by devising a viable international monetary system, with gold as the basis—a gold exchange standard, based on gold at the right price? Will the Government not realise that unless something is done to clear up the monetary situation we shall not get out of the present mess?

Lord Trefgarne

My Lords, I am not sure that I wholly agree with the noble Lord. Certainly there is some room for improvement within the international monetary system, but I fancy that a better way forward would be towards the development of the special drawing right system, perhaps tying the special drawing right to a basket of international currencies. There are real, genuine difficulties in the way of bringing gold back to the role that the noble Lord suggests, not least the difficulty of reaching agreement as to the price at which that should be, and not least the point that I am not certain that there is sufficient gold in the world for the purpose.

Lord Blyton

My Lords, is the Minister aware that when we were on the gold standard, having been put on it by the late Winston Churchill, we had nothing but unemployment and poverty, right from 1926 until 1931? I hope, for God's sake, that, as bad as our position is today, we are not going back to that situation.

Lord Trefgarne

My Lords, I am not sure that the noble Lord is right in his cause-and-effect analysis. The way forward, as we see it, is for the principal trading nations of the world to follow prudent and sound economic policies.

Lord O'Brien of Lothbury

My Lords, would the noble Lord not agree that whatever international monetary system may eventually replace the present régime of floating rates, it must be based on the universally accepted and highly liquid store of value? Furthermore, would he agree that no national currency is likely to fulfil that role satisfactorily? Would he further agree that at the moment there is no sign that the special drawing right is filling itself out to fulfil that role?

Lord Trefgarne

My Lords, I agree that the way forward is by the creation of a store of value, as the noble Lord said, but I am sorry to say that I also have to agree that the special drawing right is not yet in a position to fulfil that role. We would be happy for it to become stronger than it is, at least, and perhaps that is why the way forward is, as I described to the noble Lord, Lord Boothby, by tying the special drawing right to a basket of international currencies.

Lord Shinwell

My Lords, is the noble Lord aware that I regret very much that he failed to agree with my noble friend Lord Boothby? After long years of propaganda in the other place and in your Lordships' House, is it not time that there was agreement with him?

Lord Trefgarne

My Lords, I think that the noble Lord, Lord Boothby, certainly deserves an "A" for effort.

Lord Stewart of Fulham

My Lords, am I not right in supposing that among the chief suppliers of gold today are the Soviet Union and the Republic of South Africa? Would the noble Lord agree that an arrangement which increased the influence of those two countries in the world would not, on the whole, be beneficial?

Lord Trefgarne

My Lords, there is undoubtedly some strength in what the noble Lord says. South African gold supplies are already very much integrated into the world monetary system, but that is certainly not the case as far as the Soviet Union is concerned, who are, indeed, major gold producers.

Lord Bruce of Donington

My Lords, would the noble Lord agree that far more important than the role of gold in any future international monetary system is the role of the commercial and central banks, which needs to be more carefully examined in the future—bearing in mind that over the past few years many of them have behaved with the grossest irresponsibility?

Lord Trefgarne

My Lords, I do not think I agree with that. I think that if one looks at the difficulties in Latin America, for example, which have occurred recently—and I am thinking of Mexico and Brazil—certainly the international monetary community (if that is the right phrase) have done a splendid job in preventing what could have been very serious difficulties in that part of the world.

Lord Boothby

My Lords, is not the answer to the noble Lord, Lord Blyton, that the misery of the 1930s was caused simply because we went back to the gold standard at the wrong parity of exchange, as was admitted by the then Chancellor of the Exchequer, Mr. Winston Churchill?

Lord Trefgarne

My Lords, the observation of the noble Lord, Lord Boothby, if I may say so, is a lesson of how wrong it is to try to prepare our arrangements for this year based on the experiences of, perhaps, 50 years ago.

Forward to