Trades Union Congress: Smith is urged to back call for devalued pound

JOHN SMITH came under intense pressure from the big unions to support what amounted to an immediate devaluation of sterling as he paid a flying visit to the Trades Union Congress.

Hours before a dinner with TUC leaders the leader of the Labour Party indicated that he supported an eventual realignment of the European Exchange Rate Mechanism, but not an instant devaluation. Mr Smith has said that a new structure within the ERM is inevitable before the planned introduction of the new single European currency in 1995.

He insisted that the most pressing need was for interest rates to come down in order to tackle the increasing unemployment rate and that devaluation was not the official policy of the TUC.

However, at congress, leaders of the party's largest affiliates called for an urgent realignment of the ERM whereby the German mark was revalued against the pound. Mr Edmonds, general secretary of the GMB general union and a close confidant of Mr Smith, told the TUC delegates: 'The impossibly high exchange rate is turning Britain into a rust-bucket economy.'

In recent months devaluation has been a policy which never spoke its name in the Labour movement, but as the recession deepens union and party activists alike are calling for it publicly.

The Government will take comfort from the fact that Mr Edmonds chose the TUC's debate on Europe yesterday to call for a realignment - hours before Mr Smith attended a social gathering with the TUC's general council. The Labour leader is sponsored by the GMB.

In his speech to 900 delegates, Mr Edmonds said: 'If we are truly committed to halting the slide towards three million, three and a half million or even four million unemployed, there is one action above all that needs to be taken urgently and that is to change the value of the pound against the deutsch mark. The pound is over- valued.

'Some people proclaim it and some people whisper it, but most people in industry now know it to be true. We can only sustain this madcap exchange rate by killing off jobs, by killing off companies, by killing off hope and killing off a great deal of our industrial future.'

Mr Edmonds' views were later endorsed by Bill Morris, leader of the Transport and General Workers' Union, the party's biggest affiliate, and Alan Jinkinson, general secretary of the local government union Nalgo, which is not part of the Labour Party, but is the country's biggest white-collar union. Nalgo has a long-standing policy in favour of realignment, but kept it under wraps during the election.

Leaders of the right-wing Amalgamated Electrical and Engineering Union, the third biggest affiliate, are understood to back a new relationship within the ERM, but officials attacked Mr Edmonds for making the call as Mr Smith came to Blackpool. It would draw attention to the outdated relationship between the party and unions, they believed.

Paying the first visit of any employers' representative to Congress, Howard Davies, director general of the CBI, argued against realignment: 'We have tried before to devalue our way to prosperity without conspicuous success.' He did not believe that sterling was overvalued against other currencies. 'CBI members complain about the weakness of the dollar, as well they might, but they accept the challenge of competing with the Germans or French at current exchange rates.'