Rate of change

The exchange rate between sterling and the US dollar has now strengthened to around £1.60 and €1.18 for the euro – a rise of about 6 per cent in the case of the dollar over the past three months.

This is exactly the opposite of what needs to happen.

The consequent increased uncompetitiveness of the UK economy is bound to take its toll and to exacerbate all the negative trends from which we currently suffer.

Does it make any sense to allow this to happen?

The higher the exchange rate gets, the more likely it is that we will have little or no growth, higher unemployment, mounting regional and socioeconomic inequality, rising government and national debt, a worsening pensions crisis, an increasingly fractured welfare state, more over-strained public services and declining international significance.

None of these disastrous outcomes is necessary.

All are the result of misplaced priorities, faulty analysis and incomprehensible failure to recognise that exchange rate management is one of the most powerful economic levers the government has at its disposal. It is the almost universal neglect of any consideration of the exchange rate being far the most potent influence on the competitiveness or otherwise of the UK economy which is the root cause of our dismal economic performance.

Plenty of complementary policies will be needed to foster better economic performance.

But without a competitive exchange rate, to enable us to pay our way in the world, no other mix of policies will work.

John Mills

Exchange Rate Reform Group

Regis Road

London