§ Mrs. Faithasked the Chancellor of the Exchequer what advantages to, and obligations for, the United Kingdom would occur as a result of membership of the European monetary system under the correct conditions.
§ Mr. LawsonIf the United Kingdom were to join the exchange rate mechanism of the European monetary system, our main obligation would be to keep sterling within a band about its central rate. We would also take part in the very short-term financing arrangements. This would oblige us to lend sterling when necessary to other participants for short periods to help them intervene in support of their currencies. We would have a corresponding right to borrow foreign currency for short periods when necessary for our own intervention.
The consequences of participation in the exchange rate mechanism would depend on the circumstances at the time. But in the correct conditions we would benefit from a more stable exchange rate against other Community currencies.