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The Pound Sterling

Volume 374: debated on Wednesday 29 September 1976

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2.52 p.m.

My Lords, with the leave of the House, I should like to make a Statement about sterling.

The Government have been much concerned at the sharp further depreciation of sterling seen in recent days. This has taken place despite the solid progress being made in tackling our underlying problems. But sterling, in common with all other major currencies, is floating and it is not appropriate or practicable to stand out in all circumstances against strong but temporary market pressure. I am pleased, however, to be able to tell noble Lords that there is a better atmosphere for the pound today. I believe that announcement of the Government's intention to apply for a standby from the International Monetary Fund has contributed to this improvement.

That is the conclusion of the Statement, but may I add that the delicacy of all these matters necessarily inhibits me from being much more forthcoming. I trust that noble Lords will bear this in mind in putting questions to me.

My Lords, may I thank the noble Lord for making a Statement as was suggested by my right honourable friend the Leader of the Opposition in another place yesterday. I would say to him that I do not think anyone would underestimate the gravity of the position about which he is speaking. There can be no one in this country from any walk of life, whether workers, house-wives, businessmen, anybody, who does not regard the declining value of the pound with the utmost concern at the present time. I think it takes today the export of 15 cars to buy what the export of 10 cars would have bought in foreign currency three years ago. That is the sort of measure of what is happening to the pound.

Having said that, I must say to the noble Lord that I find his Statement against the background of the gravity of the scene that confronts us somewhat below the level of what I think the country would expect. I do not suggest for one moment that the noble Lord is complacent. I know him too well and respect him too well, but I would say that there is perhaps a danger that some people reading this Statement, implying that nothing much was happening to us that does not happen to other major currencies, will feel that it gives a certain air of complacency which is out of place and dangerous for sterling at this moment.

I should therefore like to put certain questions to the noble Lord. What we wanted to know was what fundamental policy changes and what actions do the Government intend to put a stop to this steady erosion of the currency? If he cannot say today, would he tell us when he could say? But he must be able to state some change of policy, some action, that is proposed. Could he say when we could expect that; or is it really, as this Statement implies, the intention of the Government to go on with the "mixture as before" and no radical change in policy whatsoever? If that is their intention, I think that the noble Lord should say so, so that we all know where we stand.

I note that it is the intention to apply for an additional line of credit with the International Monetary Fund. I note, and I welcome the fact, that the noble Lord says that this may have contributed to a rise in sterling, something we must all welcome. But does the noble Lord recognise that loans, however massive, are a palliative? Would he agree that borrowing money just to buy our own currency is no possible solution to the kind of situation which confronts us at the present time? It would be no solution to any country, perhaps least of all to a country that is borrowing £35 million a day already; and that is distressingly obvious not only to us but, alas! to everybody who looks at what we are doing at the present time.

May I ask the noble Lord what other policies he is considering? I note that his Leader was being much pressed at Black-pool to follow policies of a closed economy; that is to say, a wide use of import controls and the rest. I think that this House is entitled to hear from the noble Lord the Lord Privy Seal whether or not that is part of the Government's thinking. I am not expressing a view about it. I do not happen to agree with it much, but I want to know. This is purely interrogatory. I think that the country is entitled to know whether or not that is part of the Government's policy.

Finally, my Lords—and this is really the main point I want to make—surely what is required now is a settled, long-term policy of relevant actions which are wholly devoted to the job of getting this country straight again. Central to such a policy must be cuts in spending simply in order that we should borrow less, because we must borrow less. We cannot go, every time there is a crisis, to another line of credit, another loan, another backing, by hard-currency countries. Sooner or later we have got to live within our income. I think that we are entitled to ask—

Several noble Lords: Order, order!

My Lords, I think it would perhaps be appropriate if I called the attention of the House to what all noble Lords already know: that a Statement should never be allowed to be made the occasion of an immediate debate. I feel—and I think that a great many Members of the House would agree with me—that the noble Lord was over-stepping our normal procedures.

My Lords, may I say to the noble Baroness that I took up this point before I came here with the noble Lord the Lord Privy Seal, for I was under the same illusion as is the noble Baroness. I therefore consulted the noble Lord the Lord Privy Seal, who said that I should not restrict myself entirely to questions though I might include some questions in the statement that I made; that I would be followed by the noble Lord the Leader of the Liberal Party. I am following exactly the advice of the Government Front Bench at the moment. May I be allowed to continue?

My Lords, as I say, we must therefore have as central to the policy a cut in spending so that we borrow less. What reference does the noble Lord wish to make to money supplies? It seems odd at a moment when sterling is under the strongest pressure that he should manage to make a Statement without any reference to money supplies whatsoever. What hope does he hold out of how we might at least abandon some of the long list of expensive, divisive and irrelevant measures which are churning through Parliament at the present time? This is my last word. I am bound to say that at the moment it appears to me that the Government are on a disaster course. Unless they can reverse it, they would do better to leave to someone else the duty to take the necessary policies in the future.

My Lords, there are no points of order in this House. The noble Lord ought to know that. My Lords, I certainly would not wish to embarrass the noble Lord the Lord Privy Seal with questions which might make the situation more difficult but I think that Statements are an occasion when comments, short comments, are in order from the Front Benches. I find the present situation, as noble Lords themselves do, extremely worrying and far more so than the Statement which we have heard would indicate. I hope that the application to the IMF for standby credit will help the situation of the pound. Is not the fundamental trouble that we are staggering from short-term measure to short-term measure, and merely putting off the problem for a few weeks? It is time that we faced up to the fact that the value of the pound declines because there is a lack of confidence in our economy, both at home and abroad.

At home this is resulting in an unwillingness to increase investment in industry and hence is producing high employment. This lack of confidence arises largely from the belief that Government policy is going to be dominated by the militant Left-Wing of the Labour Party who are hell bent on more and more Socialism and particularly on extensive nationalisation. The sooner we face up to this, no matter how unpalatable it may be, the sooner we shall solve these problems.

This is undermining—we have seen it at Blackpool—everything the Prime Minister is trying to do in leading this country. This is no longer a matter of Party politics. It is a matter for the national interest. I believe that the Government have to make it clear that they will not allow this vocal militant minority to determine Government policy. We must once more insist on collective Cabinet responsibility. Above all, we should now recognise the dangers in our own political system where the House of Commons is totally unrepresentative of the voters. We shall not restore confidence until we adopt a system which gives minority groups their proper representation—and that goes for the Left Wing, too—but no more. Today you have a militant Left-Wing section of the Labour Party which is destroying confidence in what the nation ought to be doing.

My Lords, may I say to the noble Lord, Lord Thorneycroft, that yes, he and I met and I was under the impression that of course one could ask questions and then, if necessary, make short statements. I said "short statements", and that has been reiterated by the noble Lord. The noble Lord, Lord Thorneycroft, asked me a lot of questions which I would love to debate. There is no question about that. I do not think there is time to do so at this stage. I believe the Prime Minister, in a very fine speech, deployed the strategy that we require. I agree that there are parts of our economy which need strengthening. There is a need for more purposive investment. As a former Minister responsible for the food industries and for one of our greatest industries I know—and I have always argued this—that investment and confidence are essential to the standing of sterling in the outside world.

The pound is up a little—3 cents—today, which is slightly better. I agree that the situation depends so much on our productive capacity and the confidence of industry. I am not doctrinal. I believe in a mixed economy. I believe that private enterprise has to work and profit have to be made. I believe that the nationalised industries, too, can work within this framework. This is a challenge. I thought that the Prime Minister made this abundantly clear in a very fine speech yesterday.

Let us not be too pessimistic. In the end the future will depend on ordinary men and women, skilled and professional men, on managers, industry and trade unions. There must be a Social Contract; we believe in this. We are developing an industrial strategy. I say to both noble Lords, let us look at some facts. It would be very wrong of me to debate this and I do not want to do so. The number of days lost through industrial disputes this year was the lowest for any comparable period since 1967. The number of disputes was lower than at any time since 1953. What I am trying to say is that it is not all dark, and the danger is that some people paint too gloomy a picture. Of course, there are abuses on all sides. They have to be rectified. So today in making this short announcement on behalf of the Government, I hope that noble Lords on both sides will respond clearly and constructively.

My Lords, may I ask the noble Lord, Lord Peart, one question? Is he aware that the whole world is now waiting for the Government's announcement of their intentions as to how they are to implement in action the words of the brave and great speech of the Prime Minister yesterday at Blackpool? We are all waiting for that. We have not got it today; perhaps we could not expect it. Can the noble Lord give us some indication of when the Government will be in a position to state practically what they will do? There is no time to lose.

My Lords, I am grateful for the remarks of the noble Lord, Lord Boothby. He has been extremely helpful and constructive. The speech of the Prime Minister, which I also mentioned, outlines the strategy. This is why it will be essential that we should debate these issues in both Houses. But the Statement has been made.

My Lords, is the noble Lord aware that his statement about not being too gloomy is out of keeping with the whole situation? Things could not be gloomier? Is he not aware that the paucity of information in the Statement he made is almost an insult to this House, taking into account the conditions surrounding this country today? Ought he not to think of advising his right honourable friend the Prime Minister to recall the House of Commons so that Parliament as a whole can face up to the problems surrounding us in a way which can be truly effective? In the absence of that, we can only expect the situation to drift to levels for which the nation will not forgive this Government or Parliament if it allows this to happen.

My Lords, the noble Lord, who I know very well, is being too critical. If he feels that the House of Commons should be recalled, then he should give that advice to his own Leader. It is not for me to suggest that. He should do that. The House of Lords is sitting, and I am very honoured—even though I am being thrown in the deep end—to make my humble contribution today. In the circumstances, what I have said in reply to the noble Lord, Lord Thorneycroft, speaking for the Opposition, and the noble Lord, Lord Byers, speaking for the Liberal Party, is something of which they will take note, but I cannot go beyond that.

My Lords, would the noble Lord the Leader of the House take into account that there are a number of external factors over which the Government of this country have little control? First of all, the one over which they have control is the fact that we hold a reserve currency. What happens to the holders of sterling depends upon their views of the future economic situation. But there are other factors. It is the policy of Her Majesty's Government and the Opposition to look in a friendly way towards the Middle East in certain respects. That, not unnaturally, arouses a little hostility among those who hold opposite views.

Is it not true that one of the major causes of the weakness of sterling stems not from internal factors but the fact that out money is being moved and continues to move from this country because the policy of Great Britain in relation to the North Sea oil is to carry on an ultra-expensive policy of developing that oil from American resources? Our policy to succeed means ultimately the price of oil may rise and that we ought to be a member of OPEC. OPEC will not even look at us so long as we pursue the policies in the Middle East.

Would my noble friend—and he and I have often discussed this in the past—have a look at the Defence White Paper? In table 5 he will find this country is committed, as a result of an undertaking given by a Conservative Government, to maintaining four divisions in the Second Tactical Air Force on the European Land Base. It costs this country across the Exchange a sum of no less than £1,000 million a year. Is it therefore very surprising that the Deutschmark continues to be strong against sterling when we have a charge of this kind? The agreement by which the German Government should make a contribution towards our costs expired on 31st March last and has not been renewed.

Is it not a fact that it is about time this country faced up—

Several noble Lords: Order, order!

Is it not a fact that it is time this country faced up to the realities of the world in which we live? If this country undertakes commitments, however pleasant, in relation to the Middle East, in relation to oil, in relation to NATO, somebody has to pay the bill.

My Lords, may I say to the noble Lord that of course we already recognise the problem of sterling and of those who hold sterling in different parts of the world. I do not want to get into an argument about Arab/Israeli relations or even matters concerning defence. I understand what my noble friend is saying about that. I have stated the position for the Government; and there it is.

My Lords, I think the noble Lord the Leader of the House, whom I do not personally blame, will have got the feeling from most Members of your Lordships' House that the House really thought that his Statement was totally perfunctory and quite below the level of what we should expect in a situation like this. We really must not get into a situation when it appears that Parliament is the only forum which is denied the opportunity of discussing the economic situation. I understand the Chancellor of the Exchequer is to broadcast tonight and I have a suspicion he will say more than three sentences about the economy. I must put this to the noble Lord the Leader of the House: will he give an undertaking that first thing next week he will make a proper Statement to the House on the economy?

My Lords, naturally I shall take note of what has been said and shall have consultations with the Prime Minister. If there is the need for a debate on the economy I am sure that, if it is appropriate, it will be a good thing. After all, many of the arguments raised today by your Lordships have been basically on wider economic and political issues than the narrow point of sterling as it is now. I have given to the House what I felt was right. I think the House has been tolerant because views have been expressed quite lengthily, and I have taken note of what has been said.

My Lords, is the noble Lord aware that when the Chancellor borrowed his first £3,000 million the pound stood at 1·77 dollars? There has been no change in policy at all. The Prime Minister said that borrowing should stop; but the pound now stands at 1·65 or 1·66 dollars. If there is no change in policy and borrowing is not going to stop, is the noble Lord aware that the pound will go much further down?

My Lords, I hope there may be time for one more question from the Cross-Benches before we conclude this discussion. May I ask the Government whether they would consider the desirability now of developing the thought of my noble friend Lord Boothby; namely, of setting out in a public form which can be judged, appreciated and understood by everybody the measures it will be necessary to take to carry out the terms of the most courageous and excellent speech made by the Prime Minister yesterday? Is it not true that a great many countries have been in the same difficulty as the United Kingdom, though very few have the enormous financial responsibilities that we have? Is it not true that most of them have found it necessary to adopt a Stabilisation Programme, so that everybody knows and understands what has to be done? Would it not be desirable that some sort of British Stabilisation Programme should now be drawn up and adopted?

I should like to put one more question to the Government. Is it not a fact that our common interest in this country in preventing it from falling under the waves of the North Sea is incomparably greater than our interest in seeing one section of the Labour Party down another section of the Party, or in the preservation at all costs of the unity of a Party, or in seeing one Party downing another Party? I believe that many people in this country are absolutely fed up with this situation. Would this situation which we now have, and which is much more serious than people realise, not justify the formation of a National Government to carry out a National Stabilisation Programme? I know this suggestion is not acceptable to a great many politicians, but I believe that our common interests outweigh all such considerations.

My Lords, may I just reply to the noble Lord, Lord Hankey, that I thought I gave a sympathetic reply to the noble Lord, Lord Boothby, on the need to have a document or some publication which would outline the broad strategy laid down by the Prime Minister. I will see whether that can be done.

My Lords, I certainly shall not disobey the counsels of the Chief Whip. I should like to ask one question on the broader issue which has just been raised. Has not the time come when the Government should accept that to carry through the very harsh and severe measures which undoubtedly will be required to deal with this crisis—which is a very real one, as the noble Lord, Lord Thorneycrort, pointed out—the country would welcome something more than a single-Party Government with limited electoral support? Should not the Government look towards calling in the Leaders of the other main Parties to form a Government which would spread the responsibilities of leadership and also would command confidence and electoral support far beyond that which is possible for any single political Party, whichever Party it is? It would be a Government of national recovery. We have had two such Governments—in 1931 and 1940—limited in time and in objective. The sole objective is that of national recovery and it would last only until that recovery had been achieved.

My Lords, in reply to the noble Lord, Lord Balfour of Inchrye, I would only say that he has made a short and cogent argument about Coalition Government. I have noted what he said: these views have been often expressed before.