§ 1. Mr. Allen McKay
To ask the Chancellor of the Exchequer what assessment he has made of the causes of the reduction in the surplus on invisible trade.
§ The Chief Secretary to the Treasury (Mr. Norman Lamont)
The fall in the United Kingdom's invisibles surplus in 1989 reflected a number of factors, including unusually high net contributions to the EC budget and high insurance payments following disasters in the United States.
§ Mr. McKay
Is not it clear to everyone that the trade in invisibles fell into deficit in the last quarter of 1989 due to the massive trade deficit and the need to keep interest rates high to finance that with hot money? Do the Government still believe that our manufacturing industry and the trade deficit hardly matter?
§ Mr. Lamont
The hon. Gentleman's question was about the invisibles deficit, not about manufacturing, which does not come into it. We had an invisibles surplus of £2.8 billion last year. It is true that they moved into deficit in the last quarter, for the reasons that I gave, but we are projecting a surplus on invisibles of £1.5 billion this year. I am pleased that at long last the Labour party is beginning to recognise the importance of invisibles and the service industries.
§ Sir William Clark
Does my right hon. Friend agree that our international security, particularly with overseas assets, is at an all-time high, giving confidence to overseas investors in Britain, in addition to which we have high reserves and can easily withstand any pressures on the pound?
§ Mr. Lamont
My hon. Friend is absolutely right. Our overseas investments are larger, as a proportion of GDP, than in any other country and last year our overseas assets appreciated in value by some £30 billion. That is a measure of Britain's financial strength and it greatly dwarfs all the points made by the Labour party about the deficit on the current account or on invisibles.
Mr. John Smith
As the Chief Secretary seeks solace in international comparisons, will he reflect that not only do we have the worst balance of payments deficit of any of the Group of Seven countries, but we have the highest rate of inflation and the highest interest rates? Does that show that Government policy is working?
§ Mr. Lamont
If the right hon. and learned Gentleman wants to make international comparisons, why does not he also point out that in the 1980s we had the highest growth of any major country in the EC, that we have the highest rate of investment of any country in the EC, that our manufacturing productivity has grown faster than that in any other major industrialised country and that our unemployment rate is two thirds of the EC average? The right hon. and learned Gentleman is a friend of every country but his own.