§ 2. Mr. Caborn
To ask the Chancellor of the Exchequer what is the percentage rise in imports of (a) manufactured consumer goods excluding passenger cars and (b) manufactured capital goods.
§ The Chief Secretary to the Treasury (Mr. Norman Lamont)
In the six months to October, the volume of imports of consumer goods less cars was 3½ per cent. higher and the volume of imports of capital goods was 8 per cent. higher than in the previous six months.
§ Mr. Caborn
I thank the Chief Secretary for that answer and I was interested in the reference period. Can he confirm that in the years 1988 and 1989 imports of consumer goods have risen in value to a greater extent than those of capital goods? Does that not blow the Government myth that the trade deficit is due to an investment-led boom allegedly taking place in this country?
§ Mr. Lamont
I will certainly have to check the hon. Gentleman's figures. If he tables a written question, I shall be happy to answer it. Looking at the issue over a long period, for the first 10 months of 1989 capital goods imports were up 19 per cent. and consumer imports up 15 per cent. There has been a trend for some time for the growth of capital goods imports to be higher, which is a reflection of the strong investment in this country. It cannot be denied that we have had an investment boom; investment as a proportion of GDP is at its highest level ever. It is not surprising that this also shows up in the import figures.
§ Mr. Beaumont-Dark
Does my right hon. Friend agree that a balance of payments deficit of £15 billion or more matters to the long-term well-being of this country? Does he also agree that if tax concessions are available in the next Budget they should be to encourage manufacturing industry, not to lower the highest taxation rates, which would be inflationary?
§ Mr. Lamont
I note my hon. Friend's early Budget representation and we shall take it into account. We have made it clear that it would be prudent for the current account deficit to be reduced, and the Government's policies are designed to do that. It is not right to say that a country cannot finance a current account deficit for some time. My hon. Friend will know that the United States has run a current account deficit for seven years, Australia has run one for 15 years and Sweden ran one for 10 years. It is prudent to get the deficit down, but in a world in which 823 there has been extensive capital liberalisation, there are bound to be imbalances between different countries. In itself, that is not wrong.
§ Mr. Nicholas Brown
Is not the truth of the matter that the Chief Secretary's reference to an investment boom conceals the fact that the Government are desperately looking for an intellectually respectable argument as to why the balance of payment deficit does not matter but have failed to find one? It is certainly implausible for the Chief Secretary to come to the Dispatch Box and to present as good news the fact that our country now imports capital goods such as machine tools which we could make for ourselves if the Government had put their weight behind British domestic manufacturing.
§ Mr. Lamont
The current account deficit is a reflection of the excess growth of demand in this country, not a reflection of a lack of competitiveness. If it were, there would not have been the strong growth in British exports and we should not have seen British industry holding on to its share of world trade in the way that it has.
§ Mr. Forman
Does my right hon. Friend agree that the Labour party tends to exaggerate this problem, partly because it is coming right as a result of Government policies and partly because in the modern world there is a trend towards international specialisation and we are bound to see greater dependence on external factors?
§ Mr. Lamont
My hon. Friend is right and it is clear that Government policies are beginning to have an effect; export volumes are rising faster than imports. In the three months to October, export volumes were 3 per cent. higher than in the previous three months and 10 per cent. higher than a year earlier. The same figures for imports, less oil and erratics, were 1½ per cent. and 8 per cent., so exports are obviously doing well.