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The Pound Sterling

Volume 376: debated on Monday 25 October 1976

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3.44 p.m.

My Lords, with the leave of the House, I shall repeat a Statement which has just been made in another place by my right honourable friend the Chancellor of the Exchequer. His words were as follows:

"The sterling dollar rate declined sharply when business began this morning. At one point, it was more than 7 cents down on its closing rate in London at the end of last week, a week in which sterling held up well in active trading conditions.

"I understand that the whole of today's pressure has stemmed from the story in yesterday's Sunday Times which suggested that the IMF and the United States Treasury have agreed on a set of conditions, including a lower exchange rate, for the projected United Kingdom drawing from the Fund.

"This story has been denied in the most unequivocal terms both by the International Monetary Fund and by the United States Treasury. The House will have seen that Mr. William Simon, the United States Secretary of the Treasury, has described the story as—I quote his words,

'irresponsible and patently untrue'.

"Mr. William Dale, the Acting Managing Director of the IMF, said that the reports—I quote again,

'have absolutely no basis in fact as to either the Fund's method of procedure or the particular nature and size of the terms. The Fund does not, and cannot, determine its views on detailed measures until after a careful examination of the economic indicators on the spot'.

"These are Mr. Dale's words. In fact, the mission from the IMF staff will not be arriving in London for discussions with Her Majesty's Government until next month.

"It will not form a view on what terms are appropriate until it has been able to assess the prospects for the British economy in the light of Treasury forecasts which will then be available".

My Lords, that concludes the Statement.

My Lords, the House will be grateful to the noble Lord the Leader of the House for having repeated that Statement. I think on this sort of subject we must be very careful what we say. Certainly it is not the wish of anybody in your Lordships' House to say anything which would make a difficult situation more difficult. I would only say—and I think the noble Lord the Leader of the House would agree—that above all what is needed now is confidence here and abroad. If that confidence existed I think we need not fear what other people think. I hope the Government will address themselves to that aspect, and quickly.

My Lords, I should like to endorse what the noble Lord, Lord Carrington, has said. This ought to be a lesson to all of us. If a massive wave of selling of sterling can be sparked off by one newspaper article it shows how fragile our credibility overseas has become, and sterling will presumably be at risk until negotiations have been completed with the IMF. Therefore, I would ask the Government whether it would not be wise to try to hasten these discussions so that the period of risk is shortened.

My Lords, I would say how grateful I am to the noble Lords, Lord Carrington and Lord Byers, for their responsible attitude. I expected that. I remember that my first baptism here on a similar matter led to a debate, but today I believe it is right to exercise a measure of restraint although it is right for noble Lords to ask certain questions. I agree so much with the question of confidence and how important it is. On the question of talks with the International Monetary Fund, they will begin in November but there have already been soundings between officials.

My Lords, speaking from the Cross-Benches, may I say how much I personally agree with the attitude which has been adopted by the Leader of the Opposition and the Leader of the Liberal Party. Speaking as one who in the past has had something to do with the national Press, I was a little shocked at the cocksureness and irresponsibility of the article referred to. On the other hand, may I say to the noble Lord that I hope the reputation which he has been able to convey to the House of the alleged information conveyed in that article will not lead to any complacency on the part of the Government with regard to the measures which need to be taken if we are to be saved from the fate which was perhaps foreshadowed in that article. One has only to travel abroad as I have been doing in the last few weeks to realise with a sense of humiliation the compassion with which our ability to manage our affairs hitherto is commonly regarded by people of good will and of all political persuasions.

My Lords, I naturally thank the noble Lord. May I say that Mr. Simon, the United States Treasury Secretary, said that we have taken some rather courageous measures and I believe that we have to.