HC Deb 16 December 1993 vol 234 cc1261-3
8. Mr. Jacques Arnold

To ask the Chancellor of the Exchequer if he will make a statement on the prospects for the balance of payments.

Mr. Portillo

Unit labour cost performance is excellent and competitiveness has been much improved. In spite of weak activity abroad, the trend in the visible deficit is downard, with exports at record levels.

Mr. Arnold

Does my right hon. Friend agree that that performance is a considerable tribute to British exporters? Will their performance not be further enhanced by the successful outcome of the negotiations on the general agreement on tariffs and trade, into which the Government have put so much effort in recent months?

Mr. Portillo

I thank my hon. Friend for those remarks. My right hon. Friend the Prime Minister, in particular, has been a major force in pressing for the most liberal outcome to the GATT negotiations. The GATT outcome is estimated to be worth $270 billion to the world economy. My right hon. Friends the Prime Minister and the President of the Board of Trade have put great emphasis on that benefit to the world economy. That benefit far outweighs the individual difficulties of countries. Although we well understand those difficulties, they are definitely less important than that benefit.

My hon. Friend refers to the benefits to British industry. Earlier, my hon. Friend the Member for Tayside, North (Mr. Walker) spoke about the Scotch whisky industry, which exports £2 billion-worth of its products and faces tariffs of 30 per cent. in Japan, of 250 per cent. in Singapore and of 20 per cent. in New Zealand. The GATT deal is set to sweep away those tariffs progressively, which is good news for British industry.

Mrs. Helen Jackson

Is the Minister aware of the deep concern in South Yorkshire about the state of the engineering and steel industry? Yesterday, United Engineering Steels, which is one of the United Kingdom's prime exporters and at the core of United Kingdom industry, had to shed 400 jobs. That company is convinced—

Madam Speaker

Order. The hon. Lady must ask a direct question now.

Mrs. Jackson

My direct question is: what will the Government do that they did not do in the Budget to support this country's core manufacturing industry, so that the jobs of highly skilled workers and engineers in our constituencies are not lost?

Mr. Portillo

The House heard my right hon. and learned Friend the Chancellor say earlier that unemployment fell last month. It fell across the country and, incidentally, it fell in Sheffield.

The engineering industry depends on the success of other British industries, for instance, our car industry. As a result of the competitive conditions that we have sustained in Britain, we are attracting the bulk of investment into the European Community. That is because we have maintained competitive rates of taxation and that, in turn, is because we have imposed restraint on public spending. British industry has responded magnificently, improving its productivity in manufacturing by more than 4 per cent. in the past year and reducing its unit wage costs, while those costs have risen in Japan and Germany. That has given British industry a real competitive edge. The hon. Lady should be celebrating that, not carping.

Mr. Jenkin

Does my right hon. Friend agree that the prospects for our balance of trade have significantly improved since we withdrew from the exchange rate mechanism a little more than 12 months ago? Does he further agree that if we were to enter a single currency in the EC, which would involve huge costs to sustain both it and the disparities in the EC, Britain would be made less competitive and it would be bad for our balance of trade?

Mr. Portillo

The prospects for our balance of payments have been altered in recent months. I do not know whether my hon. Friend is aware that the deficit for 1992 has been revised downwards, from £12 billion to £8.5 billion, and that our forecast for the two years ahead has also been revised down, from £17.5 billion to £9.5 billion in 1993 and from £18.5 billion to £9.5 billion in 1994.

I believe that the really important factor is not any change from moment to moment in the exchange rate but the underlying improvement in competitiveness which is due to higher productivity and the control of unit wage costs. A single currency is not currently on the European agenda.