House of Lords
Thursday, 28th February 2002.
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Hereford): The LORD CHANCELLOR on the Woolsack.
"Strong Pound"
Lord Pearson of Rannoch asked Her Majesty's Government:
- Whether, in view of recent and current exchange rates, they will discourage Ministers from using the expression "strong pound".
Lord McIntosh of Haringey: My Lords, the Government do not comment on day-to-day movements in foreign exchange markets. The Government's objective for the exchange rate remains a stable and competitive pound in the medium term.
Lord Pearson of Rannoch: My Lords, on the other hand, the Government often use the expression "strong pound"—which is what the Question is about. Surely it must always be wrong to describe the pound as strong: since the euro's launch, it has fallen by about 15 per cent against the US dollar—in which, contrary to what the Minister told noble Lords on Tuesday, 60 per cent of our foreign trade is transacted. Is not the problem that those who were euphoric at the birth of the euro simply cannot bring themselves to describe it as weak, and that, therefore, the poor old pound must take the blame? Furthermore, is not "weak euro" the only truthful expression, given that it has gone down like a stone against every major currency on the planet?
Lord McIntosh of Haringey: My Lords, I have done an extensive literature search, but I have found only three recent references by Ministers to a "strong pound". In all those cases, the reference was not to the dollar but to what the noble Lord, Lord Pearson, has rightly described as a "weak euro". Moreover, in all those cases, the suggestion was not that a "strong pound", in those terms, is a good thing or a bad thing. As for the euro's share in our overseas transactions, it comprises 65 per cent of the Bank of England sterling exchange rate index, whereas the US dollar comprises only 16.5 per cent of the index.
Lord Newby: My Lords, does the Minister agree that it is completely irrelevant whether it is a "strong pound" or a "weak euro", but completely relevant—as noble Lords discussed earlier—whether our exchange rate is stable and competitive? Does he also agree that the best route to making the pound stable and competitive is for the Government to announce now that they plan to join the euro?
Lord McIntosh of Haringey: My Lords, the noble Lord, Lord Newby, takes us back to the Question
asked on Tuesday by the noble Lord, Lord Tebbit. He may also have noticed that I gave exactly the same answer to the noble Lord, Lord Pearson, as I gave to the noble Lord, Lord Tebbit. I shall also give him the same answer as I gave him last time. It was right then and it is right now.
Lord Marsh: My Lords, can the Minister give the House any indication of how far he thinks the pound would fall if the Government were foolish enough to announce that we shall join the euro?
Lord McIntosh of Haringey: My Lords, no; we do not comment on day-to-day movements in the pound.
Lord Hodgson of Astley Abbotts: My Lords, does the Minister agree that, regardless of whether the sterling exchange rate is strong or weak, the current exchange rate combined with the Government's policies is doing immense damage to British manufacturing industry, and thousands of jobs have been lost as a result of those policies?
Lord McIntosh of Haringey: My Lords, no exchange rate is right for all purposes. It is true that manufacturing industry finds difficulty in the pound's current exchange rate—not only against the euro but against other currencies as well—which is why we have taken so many measures to help manufacturing industry, notably in corporation tax levels and specific help for research and development. Nevertheless, what is bad and undoubtedly difficult for manufacturing industry is not bad for, for example, service industry, which is doing very well with current exchange rates.
Lord Hughes of Woodside: My Lords, does my noble friend agree that we need to have long memories in these matters? Is it not only a couple of years ago that manufacturing industry was screaming that the pound's exchange rate value was too low and that we were suffering dreadfully from overseas competition? Can one ever get it right?
Lord McIntosh of Haringey: My Lords, such pressure is always put on governments, but particularly in the run up to a Budget. We are currently in such a period, and we are hearing those pressures from manufacturing industry and the business sector generally. It is important that people should express their views to the Chancellor. However, those views should be expressed in the context of the fact that we have the lowest unemployment level in 30 years and our economy has the highest investment level in many years.
Lord Crickhowell: My Lords, if we start having pay increases of 9.5 per cent over a 12-month period in organisations in which the state has the sole shareholding, is there not a significant risk that we shall no longer have a strong pound?
Lord McIntosh of Haringey: My Lords, I have no doubt that the noble Lord is referring to particular wage increases. However, the general position is that wage increase levels are currently very low.
Lord Davies of Coity: My Lords, while recognising that the Question was intended to attack the euro's exchange level, does my noble friend agree that inflation and interest rate levels are much more important to our economic stability than the value of the pound?
Lord McIntosh of Haringey: My Lords, yes, it is correct to say that exchange rates are very seldom the prime mover; much more often they are the result of other economic indicators. My noble friend is right to say that the strength of our economy compared with those of other G7 members, our employment and investment levels, which I have described, and the improved productivity we have achieved are fundamentally important factors.
Lord Saatchi: My Lords, does the Minister agree with the business community that devaluation of sterling, in its exchange rate against the euro, is a precondition of joining the euro?
Lord McIntosh of Haringey: My Lords, I challenge the view that there is any settled view of the business community as such. There are those in the business community who support Britain in Europe, those who support sterling and those who support Britain out of Europe. There is no fixed or universal view in the business community. On the whole, however, the business community is very sympathetic to British membership of European monetary union.
Lord Pearson of Rannoch: My Lords, does the Minister realise that, when he uses the Bank of England's trade-weighted index as the basis to mislead the House on the balance between our trade in euros and in dollars, that index is entirely irrelevant for his purpose? Would the Government be good enough to consider the Customs and Excise figures, which confirm the figures that I have given, rather than the figures that he gave to the House on Tuesday and again today?
Lord McIntosh of Haringey: My Lords, I do not take very kindly to the word "mislead". If the noble Lord wants the figures on trade shares, they are as follows: 50 per cent of our trade is with the euro zone; 16.5 per cent with the United States; and 18.5 per cent with NAFTA—which is, I know, what the noble Lord would like us to join.
Sustainable Development: World Summit
3.9 p.m.
Baroness Miller of Chilthorne Domer asked Her Majesty's Government:
- What issues they raised at the PrepCom session in New York earlier this month which was called to discuss the agenda for the World Summit on Sustainable Development to be held in September 2002 in Johannesburg.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whitty): My Lords, the Government's view is that the Johannesburg Summit should focus on action to make globalisation work for sustainable development, especially for the poorest. Our priorities for the summit were well reflected in the comments made at the recent PrepCom by the European Union, speaking through the Spanish presidency. These priorities are: poverty eradication and sustainable livelihoods, emphasising capacity building and education; the opportunities presented by resource productivity, including the application of science and technology; energy; freshwater and oceans; and sustainable development initiatives for Africa.
Baroness Miller of Chilthorne Domer: My Lords, I thank the Minister for his reply. Does he agree, though, that there is a huge challenge for the Government, the EU and the world summit in that the earth summit builds on the good principles established at Rio, of which the Minister has outlined some, but these principles, including the precautionary principle and the polluter pays principle—which I believe the Government have signed up to; at least according to their website for the earth summit—are often ignored, challenged or ruled out of order by the World Trade Organisation? What are the Government doing to try to bring into a focused aim the two parallel universes that are dwelt in by these different organisations?
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