Balance of Trade (Hansard, 4 February 1993)

§ 1. Mr. Barry Jones
To ask the Chancellor of the Exchequer what further measures he proposes to improve the balance of trade.

§ The Chief Secretary to the Treasury (Mr. Michael Portillo)
The Government can best assist traders by keeping inflation and interest rates low. Inflation is close to its lowest level for a generation and below the European Community average. Interest rates are the lowest for 15 years and the lowest in the European Community. The extra support for the Export Credits Guarantee Department announced in the autumn statement will benefit many exporters.

§ Mr. Jones
The problem is growing, and growing seriously. Is it not the case that a Government who lack credibility and any strategy have no chance of surmounting the major problem that they face in that respect? Is it not the case also that the nation needs investment in skills and manufacturing? As long as we have a Chancellor of the Exchequer who is isolated and a Prime Minister who is indecisive, the nation cannot see that problem ever being solved.

§ Mr. Portillo
The country is receiving investment precisely because those investing from abroad have great confidence in this country and in its future. The hon. Gentleman, in particular, ought to know that, because, in his own constituency, the Toyota company is investing £140 million in a car engine plant at Shotton, which will employ 300 people and produce 200,000 engines a year. That is the sort of investment that is attracted to this country, and that is why this side of the House is optimistic. I do not know why the Opposition run this country down.

§ Mr. John Townend
Will my right hon. Friend tell the House what proportion of this year's balance of payments deficit is likely to be accounted for by Government expenditure on payments to the European Community, foreign affairs, and overseas aid? If Labour Members want a swift reduction in that deficit, should not they join those of us on this side of the House who are asking for cuts in that expenditure? Does my right hon. Friend agree that those European countries that will not send their troops to Bosnia should finance part of the cost, which is £100 million a year?

§ Mr. Portillo
It is extremely important to maintain tight control on public spending at European Community level as well as at national level. Britain always presses for that, and we are fortunate to have the support of my hon. Friend. It is important also that in the peacekeeping operations mounted across the world, there should be equality of contribution by all the countries with an interest in them. My hon. Friend is also right to make it clear that Government control over public spending can be important in making sure that we keep our balance of payments in a controllable state. Right hon. and hon.
459 Members across the Floor of the House are always advocating higher spending and higher borrowing, and that makes the task more difficult.

§ Mr. Darling
Does not the fact that the trade gap is worsening at the height of a recession, even following September's devaluation, reveal the poor state of our manufacturing base? Does not the Chief Secretary accept that, unless the Government adopt a policy to increase investment in research and development and to build up our manufacturing base, the economy will continue to be weak, the pound will continue to be under pressure and there will be no hope of the economy's recovering in the way that it should?

§ Mr. Portillo
I get very tired of hearing the Opposition bad-mouthing our country, belittling the achievements of our industry, sapping confidence in the country and discouraging foreign investors. As the hon. Gentleman ought to know, our manufacturing productivity grew the fastest among the G7 countries during the 1980s; it was at record levels in the three months up to November last year; and it is now growing at the fastest rate for five years. It is for those reasons that we feel confident in the country, and we only wish that we could hear some expressions of confidence from the Opposition.

§ Mr. Budgen
Is not a fall in the external value of the pound the market's way of dealing with the deficit in the balance of trade? Is it not important for the Government to point out that a depreciation in the value of the pound affects some but not all prices, and does not cause inflation, which can be caused only by an increase in the money supply?

§ Mr. Portillo
I agree with two aspects of what my hon. Friend has said. First, Britain's competitiveness will undoubtedly be very high in the coming year: we expect it to increase by 16 per cent. on last year's figure. It is also true that there are strong disinflationary influences in the British economy. No one should jump to any conclusions about the effect of the exchange rate on the rate of inflation.