Value of Sterling: Economic Effects (Hansard, 2 March 1993)

The Earl of Caithness
My Lords, the depreciation of sterling has provided opportunities for UK businesses. However, the key to their success remains their ability to control costs, to improve the quality of their products and to increase their non-price competitiveness. The Government's anti-inflation policies will assist them in that. In assessing monetary conditions we are taking full account of the impact of the fall in the exchange rate.

§ Lord Barnett
My Lords, I am not clear whether the Answer to my Question was yes, no or maybe. Is the Minister aware that many noble Lords would like to help the Government in respect of the pound but it would be helpful if we knew the Government's policy? The Minister's Answer did not help us. He will be aware that recently the Government spent billions of pounds trying to defend the central parity of the pound in the exchange rate mechanism at 2.95 deutschmarks and that the pound is now very low. Indeed, it is below the purchasing power parity. In those circumstances, does the Minister agree with the Governor of the Bank of England that it would be better if the pound were stronger? Is that the Government's policy?

The Earl of Caithness
My Lords, in setting the monetary conditions for the country we pay attention to the exchange rate. The noble Lord will be aware that we also pay attention to MO, M4 and asset prices.

§ Lord Richard
My Lords, how much did the country lose on Black Wednesday?

The Earl of Caithness
My Lords, I do not have an answer to that question.

§ Lord Richard
My Lords, when answering the first supplementary question the Minister clearly read from a brief on what had happened on Black Wednesday and the result thereof. Is he really telling the House that he does not have that information before him today? If he does have it, why cannot he give it to the House?

The Earl of Caithness
My Lords, I do not have that information because the Question asks the Government whether they consider the devaluation of sterling to be helpful to the management of the economy. I have answered that Question.

§ Lord Ezra
My Lords, while the reduced value of the currency should provide substantial benefits for exports, does the Minister consider that we could also make inroads with import substitution? Is there sufficient capability in British industry to respond to imports as well as to the opportunities of export?

The Earl of Caithness
My Lords, we believe that there are increasing opportunities for British business both to meet domestic demand and to take advantage of the potential that devaluation of the pound gives them in exports.

§ Lord Harmar-Nicholls
My Lords, is my noble friend aware that whether the pound goes up or down it is good sense in any business to make a virtue of necessity?

The Earl of Caithness
My Lords, I listened with care to what my noble friend said.

§ Lord Stoddart of Swindon
My Lords, does the Minister agree that the two years which we spent in the ERM caused great hardship in this country and increased the number of unemployed? Will the Government learn a lesson and take the opportunity which has been presented by the devaluation of the pound? Will they ensure that manufacturing industry is built up quickly and effectively so that there can be import substitution and an improvement in our export performance?

The Earl of Caithness
My Lords, we are seeking to encourage British manufacturing and British companies. The noble Lord will know that our exports are at record levels. We wish to see them grow further in the future and to see British companies take advantage of the present position.

§ Lord Marlesford
My Lords, would it not help to underline the admirable consistency of the Government's anti-inflationary policy, which has already proved most successful, if the Government were to delegate to the Bank of England the operational decisions on the level of interest rates within the context of the publicly-stated economic strategy so that they could turn their attention to the fiscal policy?

The Earl of Caithness
My Lords, that question is slightly different from that on the Order Paper. However, low inflation is important to sustainable growth.

§ Lord Jay
My Lords, will the Minister say whether the medium-term financial strategy and/or the Enterprise Initiative are still in force?

The Earl of Caithness
My Lords, as the noble Lord will be aware, there will be a further Statement on government policy in the near future.

§ Lord Archer of Weston-Super-Mare
My Lords, will my noble friend confirm that the noble Lord, Lord Barnett, was Chief Secretary between 1974 and 1979 when each year the deutschmark was valued at 9.3 per cent. compared with the tiny figure of 2.3 per cent. under this Government?

The Earl of Caithness
My Lords, I understand that the noble Lord was Chief Secretary during that time when the pound against the dollar depreciated by 13.3 per cent. and against the deutschmark by about 37 per cent.

§ Lord Ashley of Stoke
My Lords, am I right in assuming that the Minister does not have the information about Black Wednesday merely because of the wording of the Question? Am I also right in assuming that if a Question were tabled asking how much was lost on that day the information would be given by the Government?

The Earl of Caithness
My Lords, if the noble Lord wishes to table a Question, I am sure that the Government will respond to it.

§ Lord Barnett
My Lords, as helpful as he has tried to be, I am sure that the noble Earl will realise that the answers which he has given have not been particularly helpful to those engaged in foreign trade. Will he tell us what is the Government's exchange rate policy?

The Earl of Caithness
My Lords, we seek to monitor the exchange rate policy. There is no doubt that business would prefer a stable exchange rate whenever possible, but in the independent financial world in which we live that is not always possible.

§ Lord Eatwell
My Lords, in answer to my noble friend Lord Barnett, the noble Earl suggested that the devaluation in September had been beneficial to British industry. Therefore, does he believe that a further devaluation would also be beneficial?

The Earl of Caithness
My Lords, opportunities have been created for British business but, as I have said on this and numerous occasions, the value of the pound is an important aspect which we take into account in setting monetary policy.