Foreign Exchange Markets: Intervention (Hansard, 13 April 1988)

§ The Parliamentary Under-Secretary of State, Department of Transport (Lord Brabazon of Tara)
My Lords, no government have published accounts of the exchange equalisation account. The information is market sensitive.

§ Lord Bruce-Gardyne
My Lords, I am grateful to my noble friend for that somewhat disappointing reply. He says "no government", but is it not the case that the Government of the Federal Republic of Germany do it regularly? Would he care to comment on what seems a well authenticated estimate that last year alone the loss on intervention may have been in the region of £3 billion? Surely, a retrospective view of the cost of intervention over the previous year is not so much market sensitive as perhaps sensitive to the deduction that the Prime Minister may indeed have been right to point out that bucking the market is a bit of a mug's game.

§ Lord Brabazon of Tara
My Lords, I appreciate that the Bundesbank publishes figures for intervention in Germany, but in the United Kingdom successive governments have found that exchange market intervention tends to be more effective the less that is revealed in public about its precise details. The article, which of course I have read, suggesting that intervention might have cost the taxpayer £3 billion during 1987 contained one particularly fatal flaw, in that it did not take account of our substantial dollar liabilities as well as our assets. While our assets may be lower in sterling terms as a result of the dollar's fall, our liabilities are smaller too.

§ Lord Barnett
My Lords, does the Minister recall that on Monday he told your Lordships' House—no doubt the House was pleased to hear it—that the Chancellor had intervened by reducing interest rates to maintain the sterling exchange rate at a sustainable level? Do his answers mean that the Government, or, rather, the Chancellor, still proposes to intervene in that way and that he now considers that sterling is at a sustainable rate?

§ Lord Brabazon of Tara
My Lords, it is not our practice to comment on market tactics.

§ Lord Harmar-Nicholls
My Lords, can my noble friend tell me what good it would do to publish these figures at the end of the year when it is too late to do anything about them, whether what has been done is for good or for ill? The only people who understand these matters will carry on making guesses about what is being done and its results whatever figures are published 12 months after the event.

§ Lord Brabazon of Tara
My Lords, publication, even 12 months later, could give the market an indication of our tactics. That is why we do not believe that it is a good idea to publish even at that stage.

§ Lord Jenkins of Hillhead
My Lords, as we were assured by the Minister on Monday that there was no difference within the Government on exchange rate policy, as the Prime Minister has stated that it is ineffective and wrong to resist market forces in this field, and as the Chancellor of the Exchequer is in Washington trying to resist those market forces with the other members of the Group of Seven, can the noble Lord tell us on what basis the Government do intervene in exchange rate markets—the foundation of this Question—to what purpose and for what objectives?

§ Lord Brabazon of Tara
My Lords, intervention is a weapon that can be used to attempt to bring some stabilisation to exchange rates. As I have said, it is not our practice to comment about when we are, or are not, doing it.

Lord Bruce of Donington
My Lords, in reply to the Question addressed to him by his noble friend Lord Bruce-Gardyne, which related to the publication of an annual account of profit or loss, why did the Minister not say that the Government are afraid to publish a profit and loss account in relation to any of their activities at all and that they prefer to deal on a cash basis? If they created the dangerous precedent of publishing a profit and loss account, would it not reveal to the general public the colossal loss of public money that has been incurred by the wholesale privatisation at low prices of assets that belong to the public?

§ Lord Brabazon of Tara
My Lords, I think we are straying a little way from the Question on the Order Paper, which concerns the exchange equalisation account. However, the Government do publish a Budget every year.

§ Lord Boyd-Carpenter
My Lords, is it not a fact that all governments have followed the policy in this respect which my noble friend has outlined as the policy of the present Government? Are not the Government to be congratulated on the fact that the results have been very successful?

§ Lord Brabazon of Tara
My Lords, I am grateful to my noble friend for his question. The Government have been successful. The level of our reserves at the 1063 end of March of this year, recently revalued, is 47.5 billion dollars.

§ Lord O'Brien of Lothbury
My Lords, is the Minister aware that at least one Member of your Lordships' House not on the Conservative Benches strongly supports the attitude of HMG in relation to the publication of details of the exchange equalisation account and hopes that they will maintain that stance despite the opinions expressed by former Ministers in the Treasury?

§ Lord Brabazon of Tara
My Lords, I am very grateful to the noble Lord, Lord O'Brien, who has his great experience at the Bank of England to back up his judgment.

§ Lord Taylor of Gryfe
My Lords, I accept the Minister's reference to the secrecy of that information. Can he tell us whether any calculations are made in the department on what the cost is compared with what the cost might have been if we had joined the European monetary system?

§ Lord Brabazon of Tara
My Lords, that is a hypothetical question. To produce figures for what might have happened had we done something would be beyond anybody's ability.

§ Lord Bruce-Gardyne
My Lords, with all possible deference and respect to the noble Lord, Lord O'Brien, perhaps I may dare to ask my noble friend to explain this. How can the publication of accounts relating to a previous year possibly be market sensitive?

§ Lord Brabazon of Tara
My Lords, as I attempted to say earlier, intervention is an ongoing matter. One can only tell whether it has been profitable or not when the details have been completely unwound. That does not usually happen at any particular point in time. As I said earlier, to produce the figures even after a 12-month period could give a clue as to how the operations take place.