I am not sure what the hon. Gentleman means by the predictable rise in sterling; I was not aware that he had predicted it. We remain committed to maintaining a policy of exchange rate stability. That was agreed by the Group of Seven Finance Ministers and central bank governors in the communiqué of 23 December last year. While stability certainly does not mean immobility, any further significant rise in the exchange rate, certainly against the deutschmark, would in my opinion be unlikely to be sustainable.
Does my right hon. Friend agree that amid all the speculation about the likely next movement of interest rates and the sterling exchange rate, what really matters is keeping a continuous downward pressure on inflation? That is likely to be far more valuable to British industry than any minor damage done by a 3 per cent. rise in the exchange rate.
My hon. Friend is right. The battle against inflation is at the core of the Government's policy. That is why it is necessary, as I have said time and time again in the House, to maintain interest rates at whatever level is necessary to keep downward pressure on inflation.
Will the Chancellor bear in mind the words of the president of the CBI, who said yesterday that allowing the exchange rate to develop in this way would produce a serious threat to British industry? Is he aware that most of us thought we understood his policy, which was stability? It does not seem to be stability now. Can he explain it?
I was certainly aware of what the president of the CBI said, and I fully understand why he said it. It is also right to remind the right hon. Gentleman that he said something else, too. He said that it was very much the responsibility of business and industry to contain their costs.
In view of Britain's trade balance and the lower level of oil prices, does my right hon. Friend consider that the present strength of sterling is due to our very high interest rates, or mainly to overseas confidence in the Government's ability to manage the economy?
Do not the combination of the high pound, high interest rates, and high and worsening trade deficits emphasise the economic and social case for a Budget that puts investment before tax cuts? Does the right hon. Gentleman recall the statement that he made on the question of exchange rate stability, and the statement he made to the Financial Times on 10 November to the effect that the pound should not rise above Dm3? Has he changed his mind, or has the Prime Minister changed it for him?
I never quoted any particular figure, and if the Financial Times quoted one attributed to me it was wholly wrong. The hon. Gentleman should recognise that the policies that we have been pursuing have made this country's economy stronger than it has ever been before, with living standards at record levels, low inflation, output at record levels, exports at record levels—a far better performance than most of our major competitors.
If the Opposition Front Bench are correct in saying that high interest rates discourage investment, how is it that we have seen a more prolonged period of sustained investment in this country despite moderately high interest rates? Will my right hon. Friend confirm that he will persevere with his monetary policy until we achieve our declared manifesto aim of stable prices?
I can certainly confirm what my hon. Friend has asked me to confirm. I can certainly give that assurance. He is right to point out that the policies that we have been pursuing for nearly nine years, and which have brought unprecedented success, were condemned and criticised every inch of the way by the Opposition.