HC Deb 12 May 1988 vol 133 cc454-5
6. Mr. Forth

To ask the Chancellor of the Exchequer what is his latest estimate of t he stock of United Kingdom net overseas assets.

Mr. Brooke

At the end of last year the United Kingdom's net overseas assets were estimated at some £90 billion, second only to those of Japan.

Mr. Forth

I am grateful to my right hon. Friend for that encouraging answer. Will he confirm that a substantial part of those assets is in the United States? Does he believe that that is one of the main reasons for the most encouraging report in Fortune magazine on the excellent performance of the United Kingdom's economy under the stewardship of the Government and the Chancellor of the Exchequer?

Mr. Brooke

I do not know whether there is a connection between the two facts that my hon. Friend mentions, but he is correct in saying that there has been a warm endorsement of my right hon. Friend's policies by Fortune magazine.

Mr. Robert Sheldon

Does the Paymaster General agree that the value of the assets depends on sterling's exchange rate. Will he say how the Chancellor of the Exchequer has been able to have a quarrel with the Prime Minister on that most important matter, over which he has supreme authority? To quarrel with the Prime Minister on such matters may be unwise, but to do so openly is foolish.

Mr. Brooke

I confirm that the exchange rate affects the scale of overseas assets.

The right hon. Gentleman's second question does not seem to follow from the question originally asked by my hon. Friend the Member for Mid-Worcestershire (Mr. Forth).

Sir William Clark

Does my right hon. Friend agree that the excellent figures of overseas assets prove the strength of the British economy? Does he further agree that the money that has been invested abroad has been extremely good, not only for our invisibles, but for our export potential? Does he also agree that we should do nothing to prevent the mobility of capital, no matter where that capital is invested?

Mr. Brooke

I endorse my hon. Friend's views. The removal of exchange control has played a substantial part in the build up of the assets that we have secured.

Mr. Holland

Surely the Government realise that the scale of foreign direct investment by British companies is disproportionate to Japanese investment. Japanese investment is mainly in the financial sector and buying other countries' companies. Our foreign investment substitutes for export trade. The evidence to prove that suggests that the scale of United Kingdom direct investment is undercutting exports to other countries and that is one of the reasons why we do not have an effective response even when the pound is low, and despite the fact that at the moment the Chancellor cannot get it low.

Mr. Brooke

In practical terms the answer to that question is the opposite to the hon. Gentleman's proposition. He has omitted to notice that the Japanese have placed their largest investment within the European Community in this country. A substantial part of that investment is in manufacturing.

Mr. Batiste

Does my right hon. Friend agree that the benefits accruing to Britain from those overseas assets will continue long after the transient benefits of North sea oil? That is a major vindication for the abolition of exchange control.

Mr. Brooke

My hon. Friend is correct. In 1987 the net income from overseas assets was the highest ever recorded.