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Brexit: Positions on the Pound

Volume 799: debated on Monday 30 September 2019


My Lords, with the leave of the House I will now repeat in the form of a Statement the Answer given in the other place earlier today by my honourable friend the Exchequer Secretary to the Treasury.

“It is not appropriate for the Government to comment on specific currency market movements, nor on market positioning. We accept the market-based price of sterling and do not have a view on what level this should be. If the Government were to speculate on the value of sterling, it could hurt confidence in our macroeconomic framework. However, as the price of sterling fluctuates in the normal way, Her Majesty’s Treasury believes that investors should be entitled to hedge, including by short-selling. The foreign exchange market is a global market and it is essential that we work with other jurisdictions to ensure a consistent international approach to the oversight of these markets. That is why the UK has supported the work of the Bank for International Settlements to create a single global foreign exchange code and work is ongoing to ensure that it embeds common standards of good practice in this area. The United Kingdom will leave the European Union on 31 October, whatever the circumstances. We must respect the referendum result. We would prefer to leave with a deal and we will work in an energetic and determined way to get a better deal done”.

My Lords, the noble Lord, Lord Macpherson, one of the country’s leading civil servants, a Permanent Secretary to the Treasury for over a decade and a man who probably knows more about these issues than the rest of us put together, made a statement yesterday. Does the Minister agree with the noble Lord’s comment yesterday when he said that it,

“is right to question the political connections of some of the hedge funds with a financial interest in no deal … They are shorting the pound and the country, with the British people the main loser”?

No, I do not agree with the comments of the noble Lord, Lord Macpherson, and it is frankly sad that a person of his reputation is indulging in these ridiculous conspiracy theories. As Forbes business magazine put it, this is yet another “tin-foil-hat conspiracy theory”.

The Government supports a floating pound and it would be wrong of me to comment on what the appropriate level should be—it is for the market, at the end of the day.

My Lords, has my noble friend heard any evidence whatsoever about the scurrilous accusations made against the Prime Minister, and does he agree that this is one of the most ridiculous and absurd conspiracy theories that I have heard outside of very cheap novels?

Does the noble Lord agree that the logic of these allegations that if people have any evidence, we are a well and is highly regulated country in our financial markets, and they should report that evidence to the existing regulators? In saying that, I need to declare that I am a member of the Bank of England’s enforcement decision-making committee.

The noble Baroness speaks with great authority on this subject. Of course, there is no evidence for anybody to report, but if they have evidence, there is regulation on short selling, which is enforced. But I am not aware of anyone providing any evidence beyond scurrilous rumours.

Would the Minister, with his great interest in the history of currencies, care to comment on the long-term record? At a time when the euro is only three points behind the United States dollar as the international leading currency and is shortly due to overtake the dollar for the first time on a long-term basis, does he agree that it is rather sad that, in comparison, the pound sterling has been devalued nine times since the war—three times by government action and six times in the marketplace?

I am tempted to reply that if I knew how currencies were going to move, I would be betting on the exchanges myself, but of course I do not because it is a floating market mechanism. The noble Lord is of course welcome to do so if he wishes.

Perhaps the Minister can help us more on the conflict of interest issue. I am sure that he will confirm that there has been extensive short selling against the pound—that is not illegal—on scales that we have not seen before, and short selling against the shares of major companies in the UK. Does he not agree that there is short selling on the grounds that a no-deal Brexit will do so much damage to the UK economy that, by betting against Britain, some people stand in a position to make millions? Does he consider it to be a pure coincidence or one worth exploring that many of those short sellers—I think they take the name of “vultures” by their own choice—were also donors to Boris Johnson’s leadership campaign and are donors to the Tory party? Does that need examination?

I really did think that the noble Baroness was better than that, but obviously not. These instruments are not just a speculation tool. Companies can use shorting as a hedging tool to protect themselves from future fluctuations, it can be used by big multinationals and, as she will be well aware from her time in government, the existence of the financial markets in the City of London is of great benefit to the United Kingdom. We gain 11% of our tax revenues from those liberal markets and we should not do anything to damage those trades.

House adjourned at 5.48 pm.