Sterling: Euro Exchange Rate

Baroness McIntosh of Pickering Excerpts

Monday 9th October 2017 Lords Chamber

Asked by

[Baroness McIntosh of Pickering]

To ask Her Majesty’s Government what assessment they have made of the impact of the relative value of the euro to the pound sterling on individuals and businesses.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the UK has an inflation target, not an exchange rate target, and the Government do not express a view on the level of exchange rates. The value of sterling adjusts flexibly in response to economic conditions and market forces and sentiment. The Government will continue to monitor economic developments closely, while at the same time taking steps to promote economic growth and to support individuals and businesses.

--- Later in debate ---

[Baroness McIntosh of Pickering (Con)]

My Lords, since 2015 the pound has lost between 20% and 30% of its value against the euro, leading to the loss of Monarch Airlines and Air Berlin, among others, in the last few months. Does my noble friend the Minister believe that the quantitative easing programme embarked upon by the Bank of England to shore up the level of the pound and keep interest rates down is sustainable? Will the Treasury come clean on what the real cost to the UK economy—to individuals and businesses—will be if the United Kingdom crashes out of the European Union without a deal?

[Lord Bates]

We can certainly say that a number of those elements are, rightly, matters that are independent of government. The Bank of England has been given the UK macroeconomic mechanisms to make those judgments on interest rates. Interest rates are at an historically low level. Exchange rates can have a negative effect on imports but a positive effect on exports. It is important that we emphasise that the fundamentals of the British economy remain strong. Employment is at record levels and we continue to grow and expand, and we want to see that continue. That is very much the positive outcome we want from this complex negotiation.