§ Mr. Peter Rees
No recent formal representations have been received by my Department for or against floating exchange rates.
§ Mr. Knox
Does my hon. and learned Friend agree that the British economy worked much better with a fixed exchange rate than with floating exchange rates? In view of the uncertainty caused by floating exchange rates for those engaged in international trade, does my hon. and learned Friend think that it would be a good idea if Britain joined the exchange rate mechanism of the EMS, so removing that uncertainty at least in our trade with the EEC?
§ Mr. Rees
I hesitate to say whether the British economy has done better or worse under a regime of floating exchange rates. Certainly I am prepared to acknowledge the contribution that the EMS has made to stability between the participating currencies and therefore the spin-off advantages for trade, although, as the recent currency realignments within the system have shown, that stability can sometimes be somewhat short-lived.
§ Dr. Bray
Is the Minister aware that the recent reduction in inflation in this country is in part illusory because it is the result of the Government forcing up the exchange rate to levels which, if maintained, will result in the continuing decline of manufacturing industry? Irrespective of whether we join the EMS, what policy is his Department advocating to try to bring an air of reality to the Treasury?
§ Mr. Hordern
Will my hon. and learned Friend say how uncertainty can be removed by our joining the EMS when we recall that the French franc has been devalued twice in the past six months?
§ Mr. Woolmer
Is it not becoming increasingly clear that, as the The Times today says, there is a sinking feeling among Ministers that output is not recovering? Clearly the exchange rate is important for both our exporters and our importers. If the Minister's right hon. and noble Friend in the other place can take heart from a small increase in exports, should he not be concerned about the massive growth in imports? When will the hon. and learned Gentleman support steps to increase competitiveness through the exchange rate and lower interest rates as a result of sound economic policies, instead of the madness that the Government are foisting upon our manufacturers?
§ Mr. Rees
If the hon. Gentleman had been a little more analytical, he would have noticed that the increase in imports was due largely to imports of capital goods and machinery, which suggests that British companies are concentrating on restocking and investment. No doubt that will be reflected in increased production and exports in due course.