Mr Major’s Written Parliamentary Answer on the Exchange Rate – 22 October 1990

Below is the text of Mr Major’s written Parliamentary Answer on the Exchange Rate on 22nd October 1990.

Mr. Shore To ask the Chancellor of the Exchequer what conditions for the entry of sterling into the ERM, other than the DM2.95 central rate and the 6 per cent. margins, were sought by Her Majesty’s Government and agreed to by the other European Community countries.

Mr. Major [holding answer 19 October 1990]: The central rates and fluctuation margins, which we proposed in exercising our right to take sterling into the exchange rate mechanism, were determined by mutual agreement. No conditions for entry were sought or agreed to.

Mr. Shore To ask the Chancellor of the Exchequer now that the pound is in the ERM, what assistance, through the very short-term fund facility from the other central banks, is available to the Bank of England for the purpose of holding the rate within its agreed margins.

Mr. Major [holding answer 19 October 1990]: The Bank of England has available very short-term credit facilities with the other participating central banks. These are automatically available and unlimited in amount for financing intervention at the compulsory intervention rates. They may also be made available by arrangement for intervention within the agreed margins.

Mr. Shore To ask the Chancellor of the Exchequer who were the analysts who calculated the pound’s purchasing power parity at DM3.30, DM3.19 and DM2.95, respectively; and what publication of the International Monetary Fund suggested that industry would be competitive at the DM2.95 rate.

Mr. Major [holding answer 19 October 1990]: The analysts were Phillips and Drew, Goldman-Sachs and the London Business School. The International Monetary Fund publication was “International Financial Statistics”.