§ Mr. Norman Lamontasked the Chancellor of the Exchequer what would be the effects on the levels of the indices of wholesale prices and retail prices of changes in sterling's trade-weighted depreciation, since December 1971, of: 1 per cent., 2 per cent., 3 per cent., 4 per cent., 5 per cent., 10 per cent., 15 per cent., 20 per cent., 25 per cent., and 30 per cent., from the present level of depreciation.
§ Mr. DellThe first-round effect of a 10 per cent. depreciation would be to increase the wholesale price index—excluding food, feed, drink and tobacco—after about a year by about 2.7 per cent. and the retail price index by about 2.9 per cent. The effect of different rates of depreciation would be roughly proportionate.
§ Mr. Norman Lamontasked the Chancellor of the Exchequer what estimate he has made of the changes in the volume of exports and imports caused by a change of one point in the trade-weighted depreciation of sterling since December 1971; and whether he will publish it.
§ Mr. DellThere is a great deal of uncertainty and controversy about the exten-and the timing of the effects of changes in the exchange rate on trade volumes. Given the assumptions (a) that the initial gain in competitiveness is maintained and (b) that this level of activity implies no serious domestic supply constraints, the effects of a fall of 1 per cent. in the effective exchange rate could be an increase of the order of 1½ per cent. in the volume of exports of manufactures and a fall of ½1 per cent. in the volume of imports of manufactures. The changes in the volume of imports exclude the effects of the higher level of domestic activity.