Sterling: Exchange Rate

Lord Taverne Excerpts

Tuesday 25th June 2013 Lords Chamber

[Lord Newby]

My Lords, I agree with the noble Lord. I would just say, however, that we have been successful in reorienting trade towards the BRICS countries. China trade has increased by 76% while trade with Russia has increased by 71% and trade with other countries has increased by an almost similar amount. The problem we have been up against more than anything else is that the demand in our principal market area, the EU, has been very flat and declining. There has been a rebalancing of trade, and as the EU comes out of recession later in the year we hope that we will be able to pick up exports there as well.

[Lord Taverne]

My Lords, considering the massive devaluation of sterling since 2007 and the present state of our trade balance, is it not evident that devaluation is a tool of limited use in dealing with our economic problems?

[Lord Newby]

My Lords, it is a tool of limited use but that does not mean it is of no use at all. Obviously, you cannot have over a prolonged period all countries devaluing or competitive devaluation becomes a race to the bottom. The Governor of the Bank of England and the MPC would argue and have argued that without that devaluation our trade position would have been worse than it has been.