asked the Chancellor of the Exchequer if he will circulate in the Official Report, following the article on monetary policy in Economic Progress Report No. 123, an estimate showing by how much United Kingdom prices were reduced each year since 1976 by the appreciation of the £ sterling and by how much they have been reduced this year.
It is not possible to estimate precisely the effect of movements in sterling on prices since 1976. An appreciation has both a direct effect on prices, as a result of lower import prices and costs, and important indirect effects. These indirect effects include possible changes in the level of activity, the response of wages to the initial change in prices, and the effect of lower competing import prices on domestic producers' prices and profit margins. The magnitude of these effects is complex and uncertain. Any assessment will also depend on the assumptions made about Government policy.