The Exchange Rate (Hansard, 9 April 1998)

§ Lord Haskel
My Lords, the Government fully recognise concerns about the current level of the exchange rate. It has certainly featured heavily in your Lordships' House in recent weeks. The Government's aim is a stable and competitive pound over the medium term. The best way to achieve that is through their policies to deliver a stable, economic environment with sustainable growth, low inflation and sound public finances. Those are the conditions which will ensure that home owners and businesses can plan, save and invest for the long term with confidence. They are the best way to ensure that there is no return to the boom and bust of the past which has damaged prosperity so much.

§ Lord Dean of Beswick
My Lords, I am glad to hear a repetition of the Government's policies in these matters. I am not a prophet and therefore I have no crystal ball and cannot predict the announcement that will be made at noon. I do not know whether there will be another rise in interest rates. Is the Minister aware that if there is another increase today it will go down like a lead balloon with the two groups I mentioned in my Question? Does he not understand the long-term damage that will be caused to our manufacturing base if we are not careful? Our manufacturing base is just recovering from the damage inflicted upon it by the previous government when it was almost wiped out. I spent much of my time attacking the previous government for their treatment of owner occupiers. Does the Minister not understand the impossible burden placed on young people at the bottom end of the house buying scale who took out mortgages last year? I urge the Minister to try to influence the Government to remove that burden as quickly as is humanly possible.

§ Lord Haskel
My Lords, I, too, do not know what the Monetary Policy Committee will decide. We shall 855 have to be patient for 30 minutes. The Government are supporting home owners by ensuring a sustainable housing market recovery and avoiding the boom and bust policies which led to widespread negative equity in the early 1990s and misery for about 1 million home owners.

§ Lord Boardman
My Lords, does the Minister agree that as the Government have surrendered all control over monetary policy, the only way of solving this problem is by either increasing or reducing taxation?

§ Lord Haskel
My Lords, I do not agree that the Government have surrendered all control over monetary policy. That control lies with the Monetary Policy Committee. I believe that the committee agreed in August 1997 that it had all the mechanisms it required.

Lord Bruce of Donington
My Lords, will the Government give some consideration as to whether the time may not be far off when they may have to invoke the section of the new banking Act which allows, in an emergency, the decision as to the raising or lowering of bank rates to be taken out of the hands of the Bank of England and restored to the Chancellor of the Exchequer? Will the noble Lord give some indication as to whether in those circumstances Her Majesty's Government consider the time has now arrived to take control of the determination of the bank rate away from a committee, which apparently is divided evenly down the middle, and thereafter pursue policies in relation to monetary policy which give more encouragement to industry and prevent unemployment occurring on a massive scale?

§ Lord Haskel
My Lords, I am sure that my right honourable friend the Chancellor of the Exchequer has no plans to take away the responsibility of the Monetary Policy Committee to set interest rates. On the other hand, the Government are vigorously pursuing policies to make industry more competitive, and to encourage investment and enterprise. In that way industry will be able to deal with a high interest rate.

§ Lord Marlesford
My Lords, in the context of exchange rates what do the Government mean by a stable pound?

§ Lord Haskel
My Lords, we mean an exchange rate which can be maintained over the long term.

§ Lord Monson
My Lords, does the noble Lord agree that if interest rates were to fall to German levels, let us say, house prices would go through the roof and first-time buyers would be far worse off in consequence than they are at the moment?

§ Lord Haskel
My Lords, if interest rates came down, house prices would perhaps rise. The objective of the Government is to maintain stable interest rates to maintain stable house prices.

§ Lord Mackay of Ardbrecknish
My Lords, has the Minister had an opportunity to read Monday's 856 Scotsman which indicated the difficulty being caused to manufacturing industry by the loss of 850 manufacturing jobs on one day in Scotland? Does the Minister recall the then Labour Government welcoming in 1978 the establishment of the Mitsubishi factory in Haddington in order to manufacture television sets which provided 500 of those jobs? Do the present Government take responsibility today for the company's action?

§ Lord Haskel
My Lords, certainly the Government regret the loss of 850 jobs, whether in Scotland or anywhere else. The Government are putting in train policies which will make industry more competitive and better able to deal with the problems of a high exchange rate of the pound.

§ Lord Ewing of Kirkford
My Lords, does my noble friend appreciate that the previous government provided the most expensive inward investment in the history of this country in the shape of the Hyundai plant in Dunfermline which was supposed to provide 2,000 jobs but which has not yet opened its doors? There is no prospect of those 2,000 jobs. May we balance the books as between both sides of the House on this matter?

§ Lord Haskel
My Lords, I take note of what my noble friend says.

§ Lord Dean of Beswick
My Lords, is the Minister aware that too strong a dosage of the same medicine may well kill the patient? Does he understand that another group which has started to suffer from the strength of sterling comprises small exporters who were persuaded that their future lay in Europe, went out there but now find themselves faced with bankruptcy?

§ Lord Haskel
My Lords, what my noble friend calls dosage of the same medicine I consider to be consistency of policy. As regards small companies which moved to other European countries, fortunately I do not have to answer for the economic policies of other countries in Europe. If they had stayed here, they would have benefited from the policies which the Government have in place to help small companies. These policies are designed to make companies more competitive and better able to deal with the situation.