Economy: Currency Fluctuations - Motion to Take Note

Part of the debate – in the House of Lords at 1:07 pm on 17th November 2016.

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Photo of Lord Paul Lord Paul Non-affiliated 1:07 pm, 17th November 2016

My Lords, I thank the noble Baroness, Lady McIntosh, for introducing this debate. It is always an honour and a pleasure to listen to the noble Lord, Lord Skidelsky. I learned a great deal. I declare an interest as chairman of a manufacturing company, Caparo, and chancellor of the University of Wolverhampton.

We face a period of more than usual uncertainty about Britain’s position in the world. As our Government start to tackle the daunting task of implementing Brexit, the world is also trying to guess how the new US Administration will play their part on the world stage when they assume power early next year. Brexit and the US presidential election have been singled out by commentators as leading to significant fluctuations in the exchange rate over recent weeks. We have heard much doom and gloom from survey firms and others, keen for a good story, on the adverse consequences for the British economy that will surely follow. All are now very excited, and this has provided opportunities for the speculators to make money.

At the simplest level, it is easy to accept the received wisdom that wild fluctuations in the exchange rate create uncertainty and will deter investment in the UK. However, I believe that for Britain a fluctuating pound is really just business as usual. Honda, Toyota and Nissan, some of our biggest overseas investors, have all reconfirmed their commitment to car manufacturing in the UK and further investment. Only this week, Google announced a further major expansion in the UK. The Prime Minister’s most recent foreign policy initiative was a trade mission to India, about which I hear good things and must congratulate her; both countries can now look forward to doing more business together.

We need to distinguish between the step changes in exchange rates caused by major world events, of which Brexit may be one—although some would argue that it was merely an event that pricked an already overinflated pound—and the background noise of daily currency fluctuations fuelled by the financial chattering classes. These should be ignored. I come from a background that means I do not think any Government in this day and age can really do anything to control exchange rates.

We should not be frightened of this change. We should reflect on the long history of this country as a trading nation and what that means. I have been involved with international trade throughout my working life, from the 1950s onwards, mainly in steel and manufacturing goods. Over that period, I have seen much change in the world economy and I know from experience that a trader thrives on change, which brings opportunity. Over the years and centuries, change has also brought many opportunities for Britain which were seized by the entrepreneurs of the day. These recent events will also bring opportunities for business and investment in the UK. If they are followed through, they will create jobs and generate tax revenues for the greater good. If I was a younger man, I would love to get involved.

We must therefore do everything we can in this House to enable British business to seize these opportunities as they arise. We need clear regulation and a certain tax regime; we need an educated and skilled workforce; we need modern infrastructure and good transport systems. These, I believe, are the things that matter to investors over the longer term, not the day-to-day noise of the currency markets. After all, if we can get all that right, we will have a strong Britain and a strong pound.

Let us look at the effect of a weaker pound on higher education. A weak pound means that studying in the UK is cheaper. Britain’s international reputation means that it is the number one destination for international students. We cannot afford to lose that status; in fact, we must strengthen it. Universities are looking for an increase in the fee income from overseas students from the present £3.7 billion to £4.8 billion in 2018-19, and a growth in home and EU students of over 10%. This is the time to really encourage overseas students to come here. Not only do they benefit from the experience but our own students benefit by interacting with people from different backgrounds. Bonds forged at university often last a lifetime and will open more doors to further trade and international collaboration in the future. However, encouraging more students is at odds with the current immigration policy, so we have to find ways to make sure that they return to their own countries when their studies end. The University of Wolverhampton, where I am chancellor, is doing all it can to promote these policies.

Let the Government do everything they can to assist our businesses and universities to build a Britain that will be as great in the future as it has been in the past. The world still retains a respect for Britain as a beacon for democracy—a reputation that has been put to the test by Brexit. Personally, I have always supported being in Europe, including joining the euro to gain all its benefits, but the people have decided. Speaking as a democrat, for that beacon of democracy to continue to shine brightly the Government must be seen to act on the wishes of the people by engaging with the EU on implementing Brexit now. Decisive actions on these issues really matter for our businesses and universities in making their investment decisions, not the daily fluctuations in the value of the pound, but this is no simple task. The Prime Minister must now be allowed to move forward with Brexit in an orderly manner, without irrelevant distractions. That in itself will reduce currency fluctuations.