HC Deb 06 December 1990 vol 182 cc435-6
2. Mr. Matthew Taylor

To ask the Chancellor of the Exchequer if he will make a statement on the balance of payment figures.

The Chief Secretary to the Treasury (Mr. David Mellor)

In the latest three months, the current account deficit was £3.1 billion—roughly half the peak recorded in the third quarter of 1989. It is likely to continue to fall as domestic demand pressures ease further.

Mr. Taylor

Does the Treasury team think that the former Chancellor of the Exchequer, the right hon. Member for Blaby (Mr. Lawson) was, and is, correct in believing that the deficit is self-correcting and not a matter for Government action, or do they agree with the new Prime Minister that the deficit is a problem and, if so, what do they intend to do to reduce it further?

Mr. Mellor

I do not think that there is any great divide between my two right hon. Friends. On the contrary, it has been a commonplace of Government policy for a long time, and continues to be, that the deficit must be reduced, which it is being. We are confident that we shall meet the targets that we set.

Mr. John Townend

I congratulate my right hon. and learned Friend on his promotion and I trust that he will bring his undoubted enthusiasm to keeping Government expenditure under control. What effect do Britain's contributions to the EC, overseas aid and the cost of the Rhine Army have on the balance of payments, and what plans do the Government have to reduce that burden on the British taxpayer and reduce the balance of payments deficit?

Mr. Mellor

I am most grateful to my hon. Friend for his kind remarks. The three policy issues that he identifies are ones to which the Government have commitments, which will be honoured.

Mr. Madden

Will the Chief Secretary confirm that a large chunk of Britain's trade deficit is made up of imported textiles and clothing? Does he appreciate that there will be an explosion of anger from the men and women whose livelihoods depend on the British textile and clothing industry if today, in a desperate effort to salvage the general agreement on tariffs and trade talks, their jobs are traded off and British industry is sold down the river?

Mr. Mellor

I understand what the hon. Gentleman says. A balance has to be struck between the interests of industry and those of the consumer. I see no reason why the livelihoods of the people about whom the hon. Gentleman is quite properly concerned should be put at risk by the discussions. There are some encouraging signs that the level of imports is no greater now than 12 months ago and exports, particularly manufacturing exports, have been keeping up well, with an increase of about 7.5 per cent. this year. That suggests that there is no reason for doom and gloom in the textile and clothing industry or any other.

Mr. Marlow

Would my right hon. and learned Friend be kind enough to explain what is meant by the "balancing item." Apparently, the published balance of trade figures are nothing like so bad as they were set out to be because of this thing called the balancing item. What is the reality?

Mr. Mellor

The balancing item is where the figures cannot be reconciled—[Interruption.] That is what they tell me. If I may be permitted to do so, I was about to display further erudition. The balancing item probably reflects the problems of monitoring capital inflows when, in today's world, capital inflows flow in and out without the regulations of yesterday. That is almost certainly the case, but the right hon. and learned Member for Monklands, East (Mr. Smith) will correct me if I am wrong.