§ Mr. Austin Mitchell
asked the Chancellor of the Exchequer what has been the improvement or otherwise in the terms of trade for manufactures and in the relative price of United Kingdom exports since the Letter of Intent to the International Monetary Fund in December 1976; and what he regards as a competitive exchange rate for the £ sterling in terms of the undertaking then given to the International Monetary Fund.
§ Mr. Lawson
Between the fourth quarter of 1976 and the third quarter of 1979, the terms of trade in manufactures improved by about 12 per cent. The unit value of United Kingdom exports of manufactures relative to those of other countries is estimated to have increased by around 25–30 per cent. over the same period; little information on other countries' export prices for the third quarter of 1979 is yet available and so this estimate is to a large extent based on fore-820W casts and projections.
Competitiveness cannot be achieved merely by changes in the exchange rate. Any improvement in competitiveness brought about by a fall in the exchange rate might be only temporary since it could result in higher prices in the future: lasting improvements in competitiveness can be achieved only through the containment of domestic inflation.