International Monetary Situation

Part of the debate – in the House of Commons at 12:00 am on 22 February 1973.

Alert me about debates like this

Photo of Mr Denis Healey Mr Denis Healey , Leeds East 12:00, 22 February 1973

I must be satisfied with that reply.

Although I was grateful for the comprehensive narrative provided by the right hon. Gentleman, I regret to say that he showed himself to be a little too complacent about the general outcome of the crisis and some of its implications. What is clear from what he said is that the United States got out of this crisis everything that it tried to get in the crisis 18 months ago and failed to obtain at the Smithsonian talks.

It must be said that the international speculators made a very big killing, amounting to about 600 million dollars out of the German Government alone. Every time international speculators make a killing out of speculation on the possibility of currency changes, the probability is that they will seek to do so increasingly in future.

The Chancellor gave no indication that there had been any serious discussion of how to prevent this type of speculation occurring in the future. We are well aware that there is now around 100,000 million dollars-worth of Euro currency footloose and available for speculation of this type. The dollar component of that currency, on the best estimate I have seen, is about 70,000 million. So long as this is allowed to move at will, with the expectation of making a profit out of the change in currency parities which the movement itself may bring about, the international situation will remain vulnerable to the sort of crisis of the last few months, and the crisis to which the pound found itself so vulnerable last summer.

The second point that emerges from the right hon. Gentleman's narrative, though he was unwilling to identify it clearly, was that the European Community as a body failed completely to operate as its Governments had intended. Many of the promises made by European Prime Ministers as recently as October at the Summit Conference were not carried out. The Chancellor will be well aware that this point has been made by members of the Commission and by representatives of some of the countries not directly concerned in the discussions to which he has referred.

For most of us in this House the one agreed conclusion, although I am not sure that it is unanimously agreed, is that the reason Britain was not in the centre of the storm in the last few weeks was simply that the pound is floating. The advantages of floating have proved to be very real. It is essential that this country should be capable of enjoying these advantages, because we are particularly vulnerable to speculation—partly because we still operate 3 reserve currency and are a major international banking centre, but even more because of the disturbing trend of our balance of payments over the last year, involving a switch of £1,000 million in balance of payments over a year, and the fact that in the current year most observers expect us to have a deficit on balance of payments of between £500 million and £1,000 million. The figures over the last three months show an annual rate of deficit on balance of payments of £400 million.