Sterling: Exchange Rate

Lord Peston Excerpts

Tuesday 25th June 2013 Lords Chamber

[Lord Newby]

The UK exchange rate has fallen by about 20% since 2007. It was hoped that that would give a big stimulus to exports; it has given some, but not as much as we would have liked. On China, our trade to China over the past three years has increased by 76%. In April, for the first time, trade in goods to China reached £1 billion in a month. The access to China is proving rather better than the access to some other countries.

[Lord Peston]

I congratulate the noble Lord on his answer, which seems to me for once to be entirely right. The exchange rate did collapse but it had no noticeable effect on improving the balance of payments, as he said, because the supply side of our economy has not been able to respond. Apart from that—theoretically—we do not know whether it is the balance of payments that affects the exchange rate, the exchange rate that affects the balance of payments, or whether it is the two interacting. In other words, we do not know very much about this at all. A sensible Government will therefore concentrate on trying to improve the supply side of the economy and leave the exchange rate to go where it will.