The exchange rate is a major factor in the determination of overall monetary conditions in the economy, which are set out to maintain downward pressure on inflation. Increases in domestic costs will not be accommodated by exchange rate depreciation.
Will my hon. Friend accept that British Aerospace, Jaguar, Pilkington—the profits of which have been announced today and are down £26 million because of the exchange rate deficit—and the CBI are not always wrong? Not allowing the pound to go too high is not accommodating inflation but accommodating manufacturing industry, which is the country's life blood, on which wealth depends.
The improvement that all those companies, and British industry as a whole have shown in recent years has been the result of improved management, improved labour relations, gaining control of inflation and a better competitive position. It would not have been achieved or helped by competitive depreciation of the pound. Ultimately, it would have been undermined.
Given that for most of last year an exchange rate of DM3 to the pound was considered unsustainable, given that the level is now DM3·13 and has been over DM3·10 for weeks, given that for the first four months of this year the balance of payments deficit was the worst ever, and given that the Chancellor has today revised his assessment of the balance of payments deficit for the rest of the year, what steps will the Government take to moderate and stabilise the exchange rate and help our exporters?
The hon. Gentleman's statement contains so many untruths and wrong facts that I should not be able to rebut them in the time available. As to the balance of payments, the policies necessary to curb inflation and maintain stability in exchange rates are precisely those that in the long term ensure equilibrium in the balance of payments.