Trade Deficit (Hansard, 4 March 1993)

§ 4. Mr. Skinner
To ask the Chancellor of the Exchequer what further steps he intends to take to reduce the balance of trade deficit.

§ Mr. Portillo
Our traders are helped by low inflation, which is now at its lowest level for 25 years and below the European Community average. Our competitiveness has improved. Our annual unit wage costs are not rising. By contrast, they are rising by over 9 per cent. in Germany and in Japan. We have announced extra support for ECGD to help exporters.

§ Mr. Skinner
Why does not the Minister admit that the forecast trade deficit is likely to be about £15.5 billion? What a pathetic bunch this lot of Ministers are. Most of them come from the belly of the banking establishment, yet they have got Britain in hock. Who does the Minister blame for this mess? Does he, like St. John on the road to Maastricht, blame Lady Thatcher, or is he tied to her apronstrings? If he wants to alter Britain's balance of payments deficit, why does not he save £600 million by stopping the importation of coal, starting to export coal and saving the 31 pits? If he does that, he will turn the balance of payment deficits round.

§ Mr. Portillo
I had a feeling that the hon. Gentleman might mention my right hon. and noble Friend Baroness Thatcher. I know that he misses her greatly in this place. They were a great double act in their day. But the hon. Gentleman really should not be so pessimistic. We predict an increase in competitiveness for Britain of about 16 per cent. in 1993. That is made up of the lower exchange rate and, in particular, our very good performance on unit wage costs. As I pointed out earlier to my hon. Friend the Member for Amber Valley (Mr. Oppenheim), only a small proportion of coal is imported—about 10 per cent. of what is used in power stations. That is not the problem. The problem is the collapse in demand.

§ Sir Peter Tapsell
Does my right hon. Friend agree that a significant proportion of imports into Britain is tied 1.0 production by the subsidiaries of foreign companies manufacturing in Britain and that we should increase the amount of our direct investment overseas, as distinct from stock market investment, so that we can increase the extent of our tied exports?

§ Mr. Portillo
My hon. Friend must be right, at least in the short term. But I hope that, as companies establish themselves in Britain and as their investment reaches maturity, an increasing amount of their sourcing will be done from the United Kingdom. I heartily agree with my hon. Friend that in our overseas portfolio we want a good balance between investment in manufacturing and services and investment in stock markets abroad. There should be a balance of all those elements and of others as well.

§ Mr. Andrew Smith
British shipping contributes a net £2.3 billion a year to our balance of payments and a further net £1.5 billion in related services, but every month, as a consequence of the Government's failure to act to enable it to compete fairly with overseas operators, major lines are ceasing to trade, ships are being registered under the flags of other countries and British crews are being replaced and are losing their jobs. Will the Government urgently introduce measures to assist the competitiveness of the industry, before this vital part of our maritime heritage and of our economy is destroyed and our balance of payments plunged still further into deficit?

§ Mr. Portillo
The shipping industry is important to the British economy. Despite the gloom that was evinced by the hon. Gentleman, the Government have taken a number of steps to help the industry, which has been in a position to respond to the needs of national defence when it has been required to do so. At this stage, it would be unwise for me to say anything that might appear to prejudice the Budget.