Balance of Payments (Hansard, 30 November 1989)

§ 6. Mr. Hardy
To ask the Chancellor of the Exchequer if he will give his latest estimate for the United Kingdom visible balance for 1989.

§ 7. Mr. Andrew Smith
To ask the Chancellor of the Exchequer what is his latest forecast for the current account of the balance of payments for 1989.

§ Mr. Norman Lamont
I refer the hon. Members to the Autumn Statement forecast, table 2.3.

§ Mr. Hardy
Do not those figures illustrate our deplorable trading condition, and is not that condition the worst of all the world's industrial nations, at least those within the Organisation for Economic Co-operation and Development? Does the Minister deny that that is an illustration of the most appalling economic mismanagement throughout the past, oil-rich decade?

§ Mr. Lamont
It is not correct to say that our current account deficit is the largest as a proportion of GDP. There are countries with a larger deficit as a proportion of their GDP. I do not accept that the current account deficit is an accurate reflection of the competitiveness or health of a country's economy. The hon. Gentleman seems to be unaware that of the major industrial countries, only two are running a surplus. If he wishes to consider the health of Britain's balance sheet, let him look at our net overseas assets, which are the third largest of any country. That will be an enormous strength to us while we have a current account deficit.

§ Mr. Andrew Smith
Will the Chief Secretary give his view on whether the devaluation of the pound that has taken place since the Chancellor took office will help or harm our balance of payments? Given the Chancellor's wholly inadequate reply to the question asked by my hon. Friend the Member for Derby, South (Mrs. Beckett) will the Chief Secretary take this opportunity to make clear to the House precisely what is Government policy on exchange rates in relation to our balance of payments and inflation?

§ Mr. Lamont
My right hon. Friend the Chancellor made the Government's position in respect of exchange rates crystal clear. It is absurd and a little irresponsible of the hon. Member to press my right hon. Friend further on that subject. My right hon. Friend has gone as far as possible on a very sensitive subject, and the hon. Gentleman should not press him.
As to the balance of trade deficit and the effect of the movement of the pound on the volume of our exports, I have already said that our exports will perform better than imports over the next year. Recent import and export patterns indicate that the trend is good.

§ Mr. Higgins
In praising our balance of payments position, is it not important to note that last month imports fell, showing clearly that the measures by my right hon. Friend the Chancellor to curtail demand and to beat inflation are not only working at a domestic level but are improving our balance of payments? As to Britain's assets, perhaps my right hon. Friend the Chief Secretary will 829 commend an article by Samuel Brittan, in the Financial Times on 23 November, which brought out this country's very strong asset position—which compares favourably not only with the United States and Germany but with Japan.

§ Mr. Lamont
My right hon. Friend's remarks in respect of the current account are absolutely correct, for exports are rising faster than imports. As to the asset position of our overseas investments, we are far ahead of the United States. The two countries ahead of us are Germany and Japan. As a proportion of gross domestic product, our net overseas assets are the largest in the world.

§ Mr. Budgen
Will my right hon. Friend accept my congratulations on the Government's decision not to raise interest rates recently to counter the 4 per cent. devaluation that has occurred in the past month? Will he revert to the policy pursued during the Government's most successful economic period between 1979 and 1983, when they followed not an exchange rate target but a money supply target?

§ Mr. Lamont
I note my hon. Friend's comments. My right hon. Friend the Chancellor favours a firm exchange rate, and he continues to take account of the exchange rate alongside other monetary indicators when setting interest rates.

§ Mrs. Beckett
Does the Chief Secretary realise that these are the last Treasury questions of the decade? It has been an oil-rich decade during which the Government enjoyed the biggest oil revenues in history and took the credit for everything that has gone right. Now that Britain has the biggest balance of payments deficit in its history, can the Chief Secretary predict whether the Government will ever take the blame for anything that has gone wrong?

§ Mr. Lamont
As to the past oil-rich decade, we have allowed this country to accrue overseas assets, whereas the Labour party want to see oil revenues invested in an industrial strategy—which would mean supporting a lot of lame ducks and unprofitable investments for the taxpayer. Our policy has resulted in a stream of income and a stream of dividends that will benefit this country for years to come.