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Value of Sterling

Oral Answers to Questions — Treasury – in the House of Commons at 2:30 pm on 16th March 2010.

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Photo of Stephen Crabb Stephen Crabb Opposition Whip (Commons) 2:30 pm, 16th March 2010

What assessment he has made of the effects on the economy of recent changes in the value of sterling.

Photo of Ian Pearson Ian Pearson Economic Secretary, HM Treasury

As stated in the previous pre-Budget report, the depreciation of sterling is expected to help contribute to recovery in the UK economy. It should give a competitive edge to UK exporters, and encourage UK consumers to switch to domestically produced goods and services.

Photo of Stephen Crabb Stephen Crabb Opposition Whip (Commons)

I thank the Minister for that reply. However, given the faith that Ministers have placed in a weak sterling supporting export growth, does the drop in the previous quarter's export figures not demonstrate again both the complacency of Ministers about the recovery, and the extent of the damage that has been done to the UK's manufacturing and export base under this Government?

Photo of Ian Pearson Ian Pearson Economic Secretary, HM Treasury

We are certainly not complacent about the recovery. That is why we have taken the fiscal judgments that we have taken, and why we have said explicitly that we need to make sure that we lock in the recovery. We have taken actions to help exporters through UK Trade and Investment, which helps some 20,000 exporters every year. I happen to believe that there is more to be done: perhaps it is because I come from one of the UK's manufacturing heartlands that I believe that we will not have a successful economic future unless we export goods and services. So, yes, I think that there is more to be done, but this Government have a good record in supporting UK exporters.

Photo of Andrew Love Andrew Love Labour, Edmonton

Is not the implication of the fact that a more competitive exchange rate has not produced greater exports that we may need to do more to reflate the world economy?

Photo of Ian Pearson Ian Pearson Economic Secretary, HM Treasury

Pretty much any economist will say that there is a time lag between depreciation occurring in an economy and its visible effects in both exports and import substitution. I am confident that the normal laws of economics still apply to the UK and the global economy. Because of the financial crisis that has hit the world economy, I have concerns about the effectiveness of banks as a transmission mechanism for supporting growth in our exporters and businesses. However, I have every reason to believe that the exchange rate as it is will help UK firms.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

Every time that this discredited Government make any kind of recovery, sterling falls sharply. That is due to their lack of credibility when it comes to the deficit. Does the Minister think that it helps the Government's credibility with the markets and sterling for the Chief Secretary to make promises on tax that he has to retract five days later?

Photo of Ian Pearson Ian Pearson Economic Secretary, HM Treasury

The hon. Gentleman must have been reading one of the reports in The Times today, which said that sterling was on the slide as a result of recent announcements. That might have been true between 6 am and 11.40, but then it changed round, and apart from a blip at about 7.40 to 8 o'clock this morning, the pound has gone up again. It has been within a trading range for a considerable period of time.