Balance of Payments (Hansard, 4 February 1993)

§ 4. Mr. Raynsford
To ask the Chancellor of the Exchequer if he will make a statement on the balance of payments.

§ 5. Ms. Walley
To ask the Chancellor of the Exchequer if he will make a statement on the balance of payments.

§ 10. Ms. Quin
To ask the Chancellor of the Exchequer what the balance of trade between the United Kingdom and other countries was in 1992.

§ Mr. Portillo
The current account deficit in 1992 was £12 billion. Nevertheless, I find it encouraging that export volumes have been at record levels in recent months. Lower interest and exchange rates give a significant boost to our export prospects. It is vital that exporters keep down their wage costs.

§ Mr. Raynsford
Does the right hon. Gentleman recognise that a deficit of £12 billion in the depth of a recession is an appalling indictment of the Government's record? He used comparisons with other G7 countries in an earlier answer. Can he now tell the House what was Britain's visible trade balance with each of the other G7 countries in 1992? Was there a surplus in any of those cases?

§ Mr. Portillo
The hon. Gentleman makes the point which was made earlier, that the balance of payments deficit is at the bottom of a British recession. I say to him that most of the world is in recession, and our exporters must compete in that recession. It is remarkable to see export volumes of our manufacturers at a record level in the three months to December 5 per cent. up on the previous three months. It is the case that not only Britain but the world is in recession and our exporters are performing magnificently in that situation.

§ Ms. Walley
Why is it that we have not heard anything about the contribution that British shipping makes to the balance of payments? Does the right hon. Gentleman not agree that the contribution of the shipping industry over the past three years has been £11 billion gross and £3 billion net? Does he agree that unless he makes some contribution to British shipping, the merchant fleet of this island nation will sink without trace and the balance of payments will be much worse as a result?

§ Mr. Portillo
I believe that the British shipping industry is extremely important, and the hon. Lady is right to draw attention to it. Naturally, we receive all sorts of representations in the run-up to the Budget and she would not expect me to comment on that.
One source of new business for the British shipping industry will be the high level of British exports of motor cars in the coming years with investment by companies such as Nissan which will export two thirds of its United Kingdom-produced cars, which involves 90,000 cars per year. That is an opportunity for British shipping which I hope the industry will be able to seize.

§ Ms. Quin
Is it not the case that the Government originally forecast a deficit last year of £6 billion, which was bad enough, but in reality it turned out to be twice that amount? Why did the Government get it so wrong?

§ Mr. Portillo
I believe that many experts were not able to predict the exact figures. I do not know why the hon.
464 Lady revels in the trade figures or what point she is trying to make. I am speaking up for those people who are making a good job of exporting for Britain, and the Labour party constantly runs down their efforts. I call that deplorable.

§ Mr. Forman
In a world in which capital and investment flows are becoming every bit as important as trade flows, does my right hon. Friend agree that it is an encouraging sign that we still have a strongly positive balance in our net overseas assets?

§ Mr. Portillo
Yes. My hon. Friend is absolutely right to draw attention to that. The prediction that we have for invisibles is that our invisible surplus should double in the coming year compared with last year.

§ Mr. John Greenway
Does my right hon. Friend agree that the insurance and financial services industry in Great Britain is one of those industries that make a positive contribution to Britain's balance of trade? Does he agree that it is important for our insurance companies to take full advantage of the single market in insurance and, financial services and, therefore, that they need the same tax treatment as is enjoyed by companies on the continent?

§ Mr. Portillo
First, I pay tribute to the performance of our financial sector industries. They play an important part in the British economy. They play an important part in creating for us an invisible surplus which means that the current balance is better than the visible balance. As I said a moment ago, we expect that invisible balance to improve in the coming year. I do not think that my hon. Friend will expect me to comment now on the tax treatment of financial industries.

§ Mr. Evennett
Does my right hon. Friend agree that it is time to congratulate our exporters on their magnificent efforts on behalf of Britain and to urge industrialists and other exporters to take advantage of the benefits of low inflation and low interest rates to export even more for the benefit of Britain?

§ Mr. Portillo
My hon. Friend is absolutely right. Over the recent period, car exports have risen by 23 per cent. We are now a net exporter of television sets. The pharmaceutical industry has pushed up its exports by 16 per cent. in the past year. All those industries are surely worthy of congratulation. That is why it is so depressing to hear the Opposition talk as though those acheivements had not occurred.

§ Mr. Oppenheim
Is not the truth of the matter that in the long term our balance of trade was in serious decline every year since the war until 1979 and that in recent years, for the first time, our share of world trade in exports of manufactures has stabilised and improved slightly? Are not structural reforms, expecially reforms of education which Labour has opposed, the best way to ensure a long-term improvement? Would not the worst policy be to go back to the bad old days of penal corporate tax, with union militancy, which hamstrung British industry and forced multinationals such as Ford and General Motors to fall over themselves to resite manufacturing away from Britain?

§ Mr. Portillo
My hon. Friend is right. For some decades, the United Kingdom's share of world trade in manufactures was in decline. During the 1980s that share 465 stabilised, and we predict that it will rise in the year ahead. My hon. Friend is right to say that one of the reasons for that is the improvements that were made in the efficiency of the British economy and, in particularly, the reforms on the trade union side. My hon. Friend will need no reminding that we have recently seen jobs move from Dijon to Scotland precisely because, as President Delors said, Britain is a paradise for foreign investment.