If he will make a statement on the impact of interest rate policy on the exchange rate of the pound. [150143]

Interest rates are set by the Monetary Policy Committee to deliver the Government's inflation target. Interest rates are among a wide range of influences on the exchange rate.

As my right hon. Friend the Chancellor has already reminded the House, the Government have an extraordinarily strong record on employment creation. Nevertheless, does my hon. Friend accept that one current concern is the loss of jobs, particularly in manufacturing industry, and the consequences of those losses in different economic regions of the country? Will he take the time to remind the Monetary Policy Committee that to overshoot on interest rates—or to undershoot on inflation—has serious consequences, and that manufacturing jobs have borne some of those consequences?

My hon. Friend is right about the current strength of the economy. It is worth bearing in mind, for example, that the sterling exchange rate was stronger in June 1999, when interest rates were 5 per cent., than in 1998, when interest rates peaked at 7.5 per cent. Manufacturing needs stability in the economy, low interest rates and stable growth, and that is what it now has. The latest figures for manufacturing exports for the three months to December 2000 were 10 per cent. up on a year earlier. That is the fastest growth rate for more than a quarter of a century.

I think that the prospects for manufacturing are very optimistic indeed. Yesterday, I was in my hon. Friend's part of the country talking to manufacturers in the chemical sector—in which increased research and development is critical to success—and heard about various developments such as the new university innovation centre for organic materials at Manchester university. We want there to be more such developments and partnerships between manufacturers and universities to promote further productivity increases and to sow the prospect of even better developments in manufacturing.

Is it still the Government's position that we would not need to enter a form of the exchange rate mechanism if we were to decide to join the single currency, despite all the protestations, information and statements from the Commission to the contrary?

The Government have made our position absolutely clear: we have no intention of rejoining the ERM.

I have told Corus that my view is that the euro's inevitable rise against sterling next year will be of immeasurable help to its United Kingdom operations. Does my hon. Friend agree?

I think that we will have to wait and see what happens. As I said earlier to my hon. Friend the Member for Manchester, Central (Mr. Lloyd), recent figures from manufacturing have been extremely encouraging. We are seeing very good performances in many parts of manufacturing. My hon. Friend may have read, for example, about the new British-made models launched this week at the Geneva motor show. There is a new optimism in the car industry. He may also have read about the new South Yorkshire advanced manufacturing centre, which is being supported by Boeing and builds on the very latest metal cutting technology developed in Sheffield. Aerospace, too, has been a big UK success story. I therefore think that the prospects are extremely encouraging.