Treasury ordered to open books

It is just over five years since "Black Wednesday", when speculators like George Soros forced the pound out of the European exchange rate mechanism. If it ever happens again, we will know exactly how much it is costing the Government to try to prop up the pound
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The Independent Online
The Treasury is to start publishing full details of official transactions in the currency markets which use the Government's foreign exchange reserves to influence the pound's exchange rate, the Chancellor of the Exchequer announced yesterday.

Speaking during his first visit to the annual meeting of the International Monetary Fund, Gordon Brown said he was "opening up the books" to public scrutiny as the next step in making economic policy more accountable.

The move, which puts the UK well ahead of most other countries in terms of openness, means that in future the cost of any effort to prop up the pound during a currency crisis would be known shortly afterwards. There is no authoritative figure for the cost of Black Wednesday, 16 September 1992, although recent estimates put the loss to the Treasury at more than pounds 4bn.

Although Mr Brown is not planning to rake over history, he said that in future the Treasury would publish a quarterly statement of the net transactions using the $41bn worth of official reserves in the "forward" foreign exchange markets. These trades based on expected future levels of exchange rates, carried out by the Bank of England on behalf of the Government, are used to influence the level of the pound.

The Chancellor said: "This is open government in action." He described the move as part of the process of bringing more openness to policymaking , which will also include a Green Budget in November. If there were another sterling crisis, the government would say what steps it was taking and how much they cost.

Mr Brown's latest move came as he and other finance ministers from the G7 encouraged other countries to build up their credibility with the financial markets by publishing more information.