HC Deb 05 November 1986 vol 103 cc939-41
3. Mr. Wallace

asked the Secretary of State for Trade and Industry if he will state the current balance of trade.

The Minister for Trade (Mr. Alan Clark)

In the year ending September there was a surplus of £403 million on the current account.

Mr. Wallace

I am grateful to the Minister for that reply, but does he agree that in the third quarter of this year there was a deficit of £1.2 billion? When he looks to making up that deficit, what proportion of it does he envisage will come from increasing exports of manufactured goods and what proportion from increased exports of services? There is great fear on this side of the House that the Government are being complacent while the country's manufacturing base is being eroded.

Mr. Clark

The hon. Gentleman's figures are somewhat misleading, because we are broadly in balance for the whole of this year, although I recognise that one month in the third quarter was especially depressing. Our manufacturing productivity has increased by 32 per cent. since 1980, and in the last quarter our export of manufactures was at its highest level. I believe that that trend is on the increase.

Mr. Andrew MacKay

Does my hon. Friend agree that our trade balances will not be improved by excessive pay increases which are not linked at all to productivity and thus raise unit labour costs, making us much less competitive in world markets?

Mr. Clark

Unit labour costs are certainly a constituent in the competitiveness of British goods and services, and it is on competitiveness that success will depend. I know that Opposition Members have an insatiable appetite for bad news, but the news remains extremely good on the balance of payments front.

Mr. James Lamond

In the midst of all this so-called good news, can the Minister explain why, if we have a surplus on our balance of trade, the pound seems to be slipping all the time against almost every other currency in Europe?

Mr. Clark

The sterling-dollar rate has remained effectively the same for the past six months. The alteration in the rate against our competitors' currencies in Europe will doubtless be widely welcomed by British industry, which will no doubt endorse the hon. Gentleman's statement.

Sir Paul Bryan

Would my hon. Friend care to speculate on the long-term effect on the balance of trade if the Labour party's proposal for the control of foreign investment were put into force?

Mr. Clark

The somewhat homespun remedies peddled by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) and his friends would unquestionably have a very serious impact on confidence in the City and on the total of our trade in invisibles, which amounted to nearly £8 billion this year.

Mr. Skinner

Is not the truth of the matter that during the past seven years the manufacturing deficit incurred as a result of the Government's policies has reached more than £4 billion, whereas there was a surplus of a similar amount on 1979? Does the Minister agree that that resulted in the Government having to go to the international monetary markets to borrow $4 billion on 3 September—the highest amount ever borrowed by a British Government since the end of the second world war? Did that not result in the Chancellor of the Exchequer having to prop up the pound at the Tory party conference, using £1 billion that ought to have been used to prop up British industry and get Britain back to work?

Mr. Clark

The hon. Member's trip down memory lane, which was an almost daily occurrence under the Labour Government, betrays his ignorance, which is honourably based on a contempt for these international organisations. The decline in manufacturing trade is based on consumer preference for foreign goods. Until British manufactures are wholly competitive, that preference will continue to be expressed.

Mr. Watts

Does my hon. Friend agree that both the level of imports and the buoyancy of retail trade indicate that there is no lack of demand in the economy, contrary to the view expressed by all the Opposition parties, and that there are considerable market opportunities waiting for British companies to exploit them?

Mr. Clark

My hon. Friend is absolutely right. Consumer spending is going up very fast, and that very increase is sucking in imports and giving rise to the imbalance to which attention has been drawn. Until British goods are competitive in all sectors and all aspects, a rise in consumer spending is likely to have this effect.

Mr. Speaker

I call Mr. Robin Cook.

Hon. Members

Hear, hear.

Mr. Robin Cook

I am grateful to my hon. Friends. As I am a newcomer to these exchanges, can the Minister guide me as to any other country in the world which has managed to combine an oil surplus with a deficit on its visible trade? Did his office provide the Budget forecast of a £3 billion surplus on current account by the end of this year? Can he name another Budget forecast, even of this Government, which has gone quite so wildly wrong as that?

Mr. Clark

First, I must express my commiserations to the hon. Gentleman for the personal electoral reverse that he suffered. I recognise that that may cast a pall of gloom on some of the judgments that he offers at present. The forecast that he cited is the responsibility of my right hon. Friend the Chancellor of the Exchequer.

Mr. Wrigglesworth

Does the Minister accept that his complacency in relation to the balance of payments is quite staggering? Does he accept that the forecast, not least of his own Treasury, for the balance of payments deficit in the forthcoming year is somewhere between £2 billion and £3 billion? Does he accept that that is because of the uncompetitiveness of British industry, which has been damaged by Government policy over the past seven years, and what do the Government intend to do about unit labour costs, oil prices and the exchange rate in order to reverse that?

Mr. Clark

In fact the bad figures arose at a time when in the last two quarters the oil price had been averaging between $12 and $13 per barrel. If OPEC raises the oil price to $18 per barrel, the overall effect on our oil exports will be an increase of nearly 50 per cent. in value. Therefore, that particular ingredient is likely to be corrected in the next year if the OPEC objectives are achieved.

Lack of competitiveness is certainly a serious drawback, as I have said on a number of occasions already, but productivity in manufacturing industry is more than 32 per cent. up since the advent of this Government.

Mr. Speaker

Question No. 4. I call Mr. Robert Atkins —[Interruption.] Order. We are making very slow progress and have only reached question No. 4.

Mr. Nellist

That is because a lot of hon. Members asked questions on the last subject. They were waiting for the hon. Member for South Ribble (Mr. Atkins), who has only just come into the Chamber.

Mr. Speaker

Order. Patience is a great virtue in this place.