The deutschmark—sterling exchange rate rose from 2·96 at the start of 1988 to a peak of 3·19 on 16 May, and has since fallen to 3·13. Over the period as a whole it has risen by a little over 5 per cent.
Will the Chancellor return to the policy, which he held before March this year, of keeping within the DM2.80 to DM3 bracket? Does he not realise that the high value of the pound is destroying British industry's ability to export, and British tourism by reducing the number of people visiting this country? Does he recall that when a similar policy of high exchange and high interest rates was followed between 1980 and 1981 it destroyed 20 per cent. of British industry? Will the Chancellor operate an exchange rate policy in which he believes, instead of one based on the prejudice of the Prime Minister?
The hon. Gentleman is making a great deal out of a small change in the exchange rate. Over the whole of the period since 1981 our share of world trade in manufactured goods has held steady, after decades of decline. Therefore, our exporters are doing well and will continue to do well. What they want to see is a reasonable degree of stability in the exchange rate. What they do not want to see—certainly what the economy does not want —is a steady depreciation of sterling, which is the only exchange rate policy of the Opposition.
Is it not true that sterling has depreciated against the deutschmark by about 20 per cent. over the past three years and by about 60 per cent. since 1980? Is it not also true that the two countries with the most steadily increasing currencies since the war—Germany and Japan—have also been the most successful industrially?
How is the Chancellor getting on with his task of advising the Prime Minister on when the time will be right for Britain to join the exchange rate mechanism of the EMS? Does he update her on whether the time is right on a weekly or monthly basis? Will he tell her that industry wants the stability, particularly in relation to the deutschmark, that the EMS would provide?
I have noted the hon. Gentleman's point, which he has made on many occasions. The Government's policy on that issue remains the policy that they have stated on many occasions.
Does my right hon. Friend agree that industry and commerce are basically in favour of stable exchange rates and that, while his skilful use of interest rate changes during the past three months has achieved a fair measure of stability, that must remain a second-best alternative to full membership of the EMS?
Clearly, there is a strong case to be made for membership of the exchange rate mechanism of the EMS, and the Government agree that Britain should join. The question is when? The Government have not yet reached the conclusion that the right time has arrived.
On the substantive point, my hon. Friend is right in saying that swings in the exchange rate are not helpful to industry to the economy or to the battle against inflation. Nor, I am glad to say, have we seen wild swings in the exchange rate, certainly not the sterling exchange rate, over recent years.
Why did the Chancellor not answer that part of the question from my hon. Friend the Member for Carlisle (Mr. Martlew) that asked for his opinion on the effect of the exchange rate on British industry? Is not the exchange rate at its present level deeply harmful to the competitive prospects of British industry, as the leaders of industry constantly point out? Does the Chancellor recall that he once had a policy of shadowing the deutschmark at DM3 to the pound before the Prime Minister wrecked his policy? Has he seen the revision in the current account balance of payments figures, which shows that they were under-estimated for the first quarter by £900 million, showing a deficit of £2·8 billion, which, annualised, would be £11·2 billion as against a Budget prediction of £4 billion? What will he do about Britain's balance of payments crisis?
There is no balance of payments crisis. The current account of the balance of payments inevitably fluctuates over time, and the only need for a balance is over a long period, not in any particular year. Over the previous eight years we have had a cumulative current account surplus of over £21 billion. This year I forecast a deficit of £4 billion. I have seen the revision, and there may be further revisions, as there frequently are. It is now likely that the deficit for this year will be larger—I cannot say how much larger—than I forecast at the time of the Budget, but there is no hint of a crisis, and that is fully understood by the markets and by those who are economically literate.