Orders of the Day — International Finance, Trade and Aid Bill

Part of the debate – in the House of Commons at 12:00 am on 31 January 1977.

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Photo of Mr Peter Hordern Mr Peter Hordern , Horsham and Crawley 12:00, 31 January 1977

I have spoken before in these debates and I have always held that gold will have an increasing value because no man-made paper system can for ever attract and command the confidence of the whole world. But I am sure that the SDR system is the only one that is possible in present circumstances. I see no hope of the use of gold as international exchange, much though I might personally wish it. I go so far as to say that.

But, speaking as Opposition spokesman tonight, I agree that there is no prospect of going to gold and I have confidence in the SDR system. It is not perfect and we shall find improvements to make in it as time goes on.

There can be no doubt that the present arrangements—and we have had three reviews during the last 12 years—will be insufficient. Perhaps the Minister will tell us when the next round of increases of SDRs will take place. I know that it will be within his compass to do so. It seems that neither the United States nor West Germany favours substantial increases in SDRs, but the rest of the world does. That was the point of the remarks that I was making earlier in which the hon. Member for Motherwell and Wishaw was so interested.

This will not be the final arrangement and I am sure that we shall be asked for increases in SDRs before much longer. Unless quotas are increased, it seems that there will be substantial and intolerable strains on the present Eurocurrency market. The market has done its own recycling from the oil surplus countries very well. It successfully recycled $40 billion last year. In the banking system there has not been, as predicted, a problem of liquidity but of credit, particularly with countries such as Brazil and Mexico and, to the extent that the IMF may relieve the strain now borne by the banking system, an increase in the quotas is to be welcomed. I hope that will satisfy the hon. Member for Motherwell and Wishaw.

In practice, there has been no need for an official safety net. The Eurocurrency market has taken the strain remarkably well, but what is now required is for the OPEC countries to take their proper share of the new quotas. A banking system cannot be expected to support the imbalance between the rich and poor countries. As much as 40 per cent. of the European currency business has recently been concerned with either developing non-oil countries or the COMECON countries, whose major demands on the market have been considerable and growing.

No banking system wants to be too involved with persistent debtor countries and it is wrong that it should be. The banking system can decline to get involved, although that ignores the extent of existing commitments to countries with seemingly permanent balance of payments problems. It would be foolish not to take into account the effect of a major failure in the banking system. That is why it is right to enlarge the quotas of the IMF.

That is also why the OPEC countries should take up a share appropriate to their resources. The present position is absurd. Our quota is to go to 2,925 million SDRs, while Iran's will be 660 million, Saudi Arabia's 600 million, and Kuwait's 235 million. Our quota is nearly double that of the three major oil producers. What can be the sense in that?

It is a far cry from 1945 when we had a quota of $1,300 million compared with quotas for the United States of $2,750 million and France of $450 million. Now we are to have 2,925 million SDRs against the 8,405 million of the United States, France's 1,900 million and West Germany's 2,100 million.

Of course our figure greatly overstates our position relative to France and Germany, let alone to the OPEC countries. It is a reflection of our present weakness that, while there is a general increase of more than 30 per cent., our quota has increased by only 4½ per cent. There should have been a cut in our quota if our real position was to be recognised, but it is just as well that there was no cut, because if there had been, the Government would not have been able to carry out the enormous borrowings which they have inflicted upon the country.

The Government have borrowed so much that it is difficult to keep track of it all. What is the latest score? I make it £6·8 billion since 1st March 1975, but I am sure that the Minister will have the figure at his fingertips.

In December the Chancellor of the Exchequer wrote the second Letter of Intent to the IMF and the Group of 10 had to meet especially to authorise the extra currency required for the standby of 3,360 million SDRs—that is $3·9 billion available over two years. In addition, we have the $500 million swap from the United States Treasury and the $350 million swap from West Germany as well as the $3 billion as a special standby to fund the official sterling balances. Only last week we had a new currency loan of $1·5 billion. No one has said what that is for, but I guess that it must be to allow the private sterling balance holders to withdraw money at will and to have some sort of facility available if they so wish.

There has been a considerable flow of funds into this country in the last few weeks attracted by exceptionally high rates of interest. It is extraordinary that in this period the Government should have been pursuing a policy of overseas aid to Swiss bankers. They have been allowed to withdraw money at any time and have seen here enormous rates of interest compared with other countries. I do not know how much they have made, but it must be many millions of pounds. It is fitting that in a Bill that deals with international aid and trade we should be discussing international aid to Swiss banks, though this would hardly appear in the Bill's Long Title.