Exchange Rates (Sterling Margins)

Oral Answers to Questions — National Finance – in the House of Commons at 12:00 am on 25th January 1972.

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Photo of Mr Roger Moate Mr Roger Moate , Faversham 12:00 am, 25th January 1972

asked the Chancellor of the Exchequer if he will make a statement on what instructions have been given to the Bank of England on the permitted variation of sterling relative to currencies of member countries of the European Economic Community and those outside the Community.

Photo of Mr John Biffen Mr John Biffen , Oswestry

asked the Chancellor of the Exchequer what advice has been issued to the Bank of England concerning the margins by which sterling may be permitted to move in respect of the currencies of the European Economic Community; and if he will make a statement.

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

There have been no special instructions or advice about margins for E.E.C. currencies.

Photo of Mr Roger Moate Mr Roger Moate , Faversham

Would my right hon. Friend agree that many of our post-war problems have been created by adherence to rigid exchange rates? Regardless of one's views about Common Market membership, it would be very much against our national interest if we were to give up any of the modest flexibility we now have just in order to achieve harmonisation with the Six.

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

Once we are in the Community, obviously we should naturally expect to join in any agreed arrangement about inter-Community margins. I now have the closest working relationships with the finance Ministers of the Six, and certainly throughout the latter stages of the Group of Ten meetings in both Rome and Washington we repeatedly met together. My hon. Friend need not be concerned about the situation of this country in our discussions with these other ministers.

Photo of Mr John Biffen Mr John Biffen , Oswestry

Is my right hon. Friend aware that yesterday we were told by the Prime Minister that the wider margins were an assurance to British industry that it could have confidence in increasing its investment? Will my right hon. Friend the Chancellor therefore take this opportunity to say that he fully endorses the present wider bands which are available and thus reassure those in the House who are somewhat concerned about the proposals of the Commission that bands should be narrowed?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

No, Sir. What I would endorse is precisely what my right hon. Friend said yesterday, because it seems that that is just sheer common sense. But the point about the question raised by my hon. Friend when he asked whether any advice has been given to the Bank of England is that, as I say, there has been no special advice given to the Bank of England about this matter. Furthermore, perhaps I ought to inform my hon. Friend, concerning the E.E.C. decisions on exchange rate margins, that nothing definite has yet been decided by the Community. Further meetings are in prospect and we shall be fully consulted.

Photo of Dr John Gilbert Dr John Gilbert , Dudley

Would the Chancellor accept that the recent six months' experience of floating exchange rates was not a fair test in the light of the very heavy degree of uncertainty overlying the market consequent upon the American decisions of last August?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

If what the hon. Gentleman is suggesting is that over that period there was not free or pure floating, he is absolutely right.

Photo of Mr Peter Shore Mr Peter Shore , Stepney

Would not the Chancellor acknowledge that, having gained some much-needed flexibility in our currency margins, it would be very silly and very damaging if we were to abandon this in the period ahead? Will he please now clear up this matter? Is it or is it not his policy to make use of the 2¼ per cent. margin around parity, as the Chief Secretary led us to believe on 20th December?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

What my right hon. Friend the Chief Secretary said in reporting on the Washington meetings was quite correct, and this is our policy, but I have also said that once we are in the Community we would naturally expect to join in any agreed arrangements about intra-Community margins.

If the right hon. Gentleman is pursuing this matter, I must tell him that the situation regarding my relationship with the finance Ministers of the Six is utterly different from the relationship which persisted when he was a member of the Labour Government. This is of great importance. My predecessor, the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), made the point in the House last year that at the previous crisis gathering of the Group of Ten, when he was Chancellor, whenever the Six held a meeting he was left outside, in effect kicking his heels, when the vital interests of Britain were at stake. Thank goodness those days are now past.