Balance of Payments (Hansard, 8 June 1989)

§ 7. Mr. Martyn Jones
To ask the Chancellor of the Exchequer what was the balance of payments for the first quarter of 1989.

§ The Financial Secretary to the Treasury (Mr. Norman Lamont)
The current account deficit in the first quarter of 1989 is provisionally estimated at £4.4 billion.

§ Mr. Jones
Is the Minister aware that only this Monday the Engineering Employers Federation predicted that in 1989 the only industry in Britain which will be in surplus with the rest of the world and which is a major metal user will be the aerospace industry?

§ Mr. Bill Walker
What about whisky?

§ Mr. Jones
That industry does not use metal, so far as I am aware. Does the Minister not consider that that is a major blip on the economic policies of the past 10 years?

§ Mr. Lamont
It is not necessary for the current account to be in surplus in every sector. I regard projections for individual sectors as insignificant. It does not matter if we are in deficit in one sector, such as engineering. As a result of the measures that my right hon. Friend the Chancellor has taken, demand in the economy will slow down and the position on the current account will improve.

§ Mr. Boswell
Has my right hon. Friend noticed that the balance of payments includes an unusually high proportion of imports of investment goods? Will they not contribute to a more efficient industrial structure in the future?

§ Mr. Lamont
My hon. Friend is right. About one quarter of the value of manufactured imports between 1987 and 1988 was accounted for by consumer goods, including cars, with the remainder—fully three quarters—made up of goods for production and investment. That illustrates that, as my hon. Friend says, part of the current account deficit has been accounted for by firms tooling up for investment and higher production.

§ Mr. Macdonald
Will the Financial Secretary explain why the Government have approved the recent OECD report, which shows the balance of payments deficit getting still worse next year?

§ Mr. Lamont
I think that the hon. Gentleman is mistaken. The report has not been published or released, and he has no basis of saying that the Government have approved it.

§ Mr. Kirkhope
Does my right hon. Friend agree that the high levels of investment in manufacturing industry and the recent high level of inward investment as a result of the attraction of the Government's economic policies will result in a much better balance of payments as we progress into the 1990s?

§ Mr. Lamont
It is not just the high level of investment in manufacturing that matters but investment in the whole economy, and I am sure that the record level of investment in the whole economy is a very good thing for the long-term benefit of the economy. In that respect, my hon. Friend is right.

Mr. John Smith
Do the Government still adhere to the forecast of a balance of payments deficit of £14 billion this year? If not, when will the Minister announce that it is going to get worse?

§ Mr. Lamont
As the right hon. and learned Gentleman knows, the Government's forecasts are updated in the Autumn Statement. We still stick to the view that the current account deficit in the second half of the year will be lower than it was in the first, as was said in the Red Book, and, indeed, the figures and trends are there to show that. Export volumes in the past three months are up 1½ per cent. on the previous three and the trend is upwards, while imports are beginning to stabilise in response to the slowing down of consumer demand, which is exactly what the policies of my right hon. Friend the Chancellor were designed to achieve.