Letter: Keep the pound high

Click to follow
The Independent Online
Sir: The Conservatives have muffed it again, worrying about a soft euro and flight of savings to sterling, making the pound "too strong". This is like worrying about Britain becoming too prosperous.

A strong currency is overwhelmingly beneficial because it confers the power to command economic output. Suppose the pound traded at twice its current value against the US dollar. We could purchase any dollar-denominated commodity or property for half price. We could repay any dollar-denominated loan at half price. A strong pound will bring soft-Europeans begging for loans denominated (and repayable) in sterling. Being banker to the world is desirable.

The goal of UK monetary policy should be to attract capital to this country, not to devalue the pound so a tiny minority of exporters can flog cheap goods that can't compete against low-wage, soft-currency Asians or Europeans. Just as global inflation threatened world prosperity in the 1970s, the greatest danger today is a spiral of devaluation, with every currency competing to be the "softest" and least dependable store of value.

If William Hague wants to worry about something sensible, he should worry about new Labour taking Britain back into a continental monetary system dominated by socialist France. Surely Mr Hague remembers the idiotic ERM debacle that brought down John Major and made it possible for new Labour to seem reasonable by comparison.


Dunoon, Strathclyde