§ Mr. Austin Mitchell
asked the Chancellor of the Exchequer what is his assessment of the reasons for the appreciation of the £ sterling since 1 January 1979; and what conclusions he draws on whether the levels of wages and the availability of credit are correct.
§ Mr. Lawson
The strength of sterling over the past year has reflected the relatively tight monetary policy in the United Kingdom which has necessitated high interest rates, the market's favourable assessment of the United Kingdom's position as an oil producer at a time of rising world oil prices and market confidence in the present Government's commitment to firm monetary and fiscal policies. These are essential if monetary growth is to be checked and the rate of inflation lowered. The high interest rates are needed to bring376W
ment on the basis of this evidence about the long-term relationship between the money supply and prices, bearing in mind the emphasis which the Government have placed on control of the money supply as a means of curbing inflation.
§ Mr. Lawson
Changes in money supply and prices:
the demand for credit into line with the Government's monetary objectives. It is also important, however, that the growth of United Kingdom unit wage costs, which has exceeded that of our main competitors, should moderate if inflation is to be reduced without adding to unemployment and if industry is to achieve an adequate competitive position.