§ 2.58 p.m.
§ Lord Bruce-Gardyne asked Her Majesty's Government:
§ What is their policy on intervention in the foreign exchange markets by the Bank of England.
§ The Secretary of State for Trade and Industry (Lord Young of Graffham)My Lords, it has been the policy of this and all preceding governments not to comment on exchange market tactics.
§ Lord Bruce-GardyneMy Lords, I am most grateful to my noble friend for that helpful and informative reply! Can he possibly tell the House whether the wise warning which the Prime Minister gave in the spring about the potentially domestic inflationary effects of substantial intervention in the foreign exchange markets by the Bank of England is still, as the Americans put it, operative?
§ Lord Young of GraffhamMy Lords, perhaps my noble friend would cast his mind back a few years to the time when he was a most distinguished Economic Secretary to the Treasury. If he had been asked this Question then, he would have given the answer that I am going to give now; namely, that it is not our policy to comment upon exchange policy tactics anyway.
§ Lord Harmar-NichollsMy Lords, is my noble friend aware that it is obviously detrimental for the Bank of England overtly to intervene? That can be counterproductive by giving the impression that there is a weakness which, in the international mind, may not exist.
§ Lord Young of GraffhamMy Lords, I believe that it is best that we do not comment on this whole area. It is an area in which my right honourable friend the Chancellor of the Exchequer sees a world in which sterling is strong. He is determined that it shall stay strong, in his own words, "for the indefinite future". I believe that we should leave the matter at that.
Lord Bruce of DoningtonMy Lords, in those circumstances will the noble Lord confirm more specifically that it is the policy of Her Majesty's Government to maintain exchange rates which make our exports more expensive and which therefore are likely to hamper them? Is it also government policy to have imports cheaper and to encourage them in the existing circumstances? If the noble Lord is of a mind that he should not disclose any directions that go to the Bank of England as regards matters of this kind, will he say more precisely what is the exchange rate policy of the Government? Is the noble Lord aware of the interest rate implications on that subject?
§ Lord Young of GraffhamMy Lords, although I shall not comment on the Government's exchange rate policy, I remind the noble Lord that, whereas our reserves stood at 22 billion dollars in May 1979, today they stand at 51 billion dollars. The level of official debt that was standing at 22 billion dollars in May 1979 is now under 17 billion dollars. I believe that those figures speak louder than words.
§ Lord PestonMy Lords, is the noble Lord willing to clarify his earlier answer in case the foreign exchange markets are misled? Are we right in understanding that although the Government have a foreign exchange policy, it is simply that the noble Lord refuses to tell us what it is?
§ Lord Young of GraffhamMy Lords, I believe that my answer demonstrated blinding clarity. I do not believe that I can add anything to it.