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Floating Exchange Rates

Volume 986: debated on Monday 16 June 1980

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1.

asked the Secretary of State for Trade how many individuals and how many organisations have made representations to him opposing floating exchange rates.

I can think of no recent representations that have concentrated on opposing floating exchange rates as such, although the problems caused by fluctuating exchange rates have been pointed out to Trade Ministers and officials on a number of occasions.

Does not my right hon. Friend agree that the British economy worked better with a fixed exchange rate than it has worked with floating exchange rates? In view of the uncertainty that floating exchange rates cause among those engaged in international trade, would he not agree that it would be a good idea for Britain to join the EMS at an early stage? That would at least remove the uncertainty in respect of European trade.

I agree with my hon. Friend that the fixed exchange rate system worked well in the immediate post-war period, but in current conditions, where there is a great divergence in performance and in rates of inflation, and in view of the exchange rate problems connected with the North Sea, I cannot agree that a return to a fixed exchange rate would create any greater certainty for British industry.

Has the Secretary of State received any representations from British industry about the crippling effect of the high rate of the pound? What does he propose to do about making British industry more competitive?

I receive representations on the subject most days, and I understand the problem that a high parity causes for British manufacturing industry.

If representations are made to the Secretary of State against the floating exchange rate, will he pay no attention to them? Does he not agree that the efficient British exporter is still incredibly successful in the export markets of the world?

It is a misconception to believe that fixed exchange rates would not fluctuate. They would fluctuate more violently than floating rates, because they would have to be changed.