Balance of Trade

HC Deb 14 February 1996 vol 271 cc1001-5

11. Mr. Alan W. Williams

To ask the President of the Board of Trade if he will make a statement on the balance of payments deficit for the calendar years 1994 and 1995. [13513]

Mr. Oppenheim

In 1994, the balance of payments deficit was 0.3 per cent. of gross domestic product. In 1995, the deficit is forecast by my right hon. and learned Friend the Chancellor of the Exchequer to be about 1 per cent. of GDP.

Mr. Williams

How can the Prime Minister claim that Britain has the strongest economy in Europe when our growth rate, at 1.8 per cent., is at eighth place in Europe and when our share of world trade, at 5.2 per cent., is the lowest this century? When we have had a devaluation of 20 or 25 per cent., why do we still have a balance of payments problem?

Mr. Oppenheim

The Prime Minister may be thinking of the fact that, whereas in the decades after the war our share of world trade slipped steadily, since the mid-1980s we have stabilised that share, when many developing countries have increased theirs. He might also be thinking of the fact that, since 1981, the volume of manufactured exports from Britain has grown faster than those from France, Germany or Japan.

Mr. Brooke

I express dismay and despair at Opposition Members' lack of understanding about why the United Kingdom's share of world trade in manufactures ceased to fall in the 1980s—for the first time since the war—and, indeed, began to rise. Does my hon. Friend endorse the research carried out by Owen and Wren Lewis recently, which showed that critical to that change is the strength of investment in United Kingdom manufacturing industry?

Mr. Oppenheim

Obviously it is a matter of not only the amount of investment but the quality of investment. What differentiates investment now compared with the 1970s is that in the 1970s a lot of investment was state inspired, state sponsored and state directed into enterprises that turned out to be uneconomic, such as building massive, unneeded capacity for British Steel. Investment now is market-directed and high quality and results in goods that we can sell abroad.

Mr. Hardy

Does the Minister deny that Britain's share of world trade is lower today than it has been throughout our history?

Mr. Oppenheim

No; in answer to an earlier question, I explained that, although Britain's share of world trade fell steadily in the decades after the war, since the mid-1980s it has stabilised. That is quite a performance when the share of other industrialised countries has fallen as a result of the increased share of developing countries.

Mr. Anthony Coombs

If the Labour party cannot recognise the hugely improved competitiveness of British industry, will my hon. Friend recognise the recent comments of the president of the German CBI, who said that, of all the countries in Europe, Britain was best placed to deal with the challenge of global competitiveness? Is that not proved by recent figures from the West Midlands development agency, which show that this country now attracts record investment? In particular, in the past year, the west midlands has seen no less than £1.25 billion-worth of investment, which has safeguarded or created no fewer than 10,000 jobs.

Mr. Oppenheim

The German gentleman to whom my hon. Friend alludes may have been aware of a recent survey that showed that, whereas the manufacturing productivity gap with Germany widened sharply in the second half of the 1970s, since 1979 the competitiveness gap between Britain and Germany has narrowed by three quarters. That shows that the period when Britain really was in danger of becoming a low-wage, low-productivity, skivvy economy was not under the Conservative Government but in the days of Labour's heroic industrial strategy.

Mr. Hoon

As the Minister is so keen on making comparisons with the previous Labour Government, he should note that the previous Labour Government achieved a surplus in both 1977 and 1978, having turned around a deficit inherited from the Conservatives. Despite the Minister's selective use of statistics, is it not the case that, first, in 1995 the Conservatives presided over their 10th successive annual deficit in the balance of payments current account; secondly, the UK's trade balance in manufactured goods went into deficit in 1983 for the first time since the industrial revolution, and has stayed there; thirdly, the United Kingdom's share of world trade has fallen to its lowest point this century, from 7.7 per cent. in 1980 to 5.2 per cent.—[HON. MEMBERS: "Question."] I said, "Is it not the case?" That is because, notwithstanding the Minister's historical comparisons—I am tempted to say hysterical comparisons—the United Kingdom has today fallen to 21st place in the international investment league.

Mr. Oppenheim

I think what the hon. Gentleman means is that under the last Labour Government our trade was roughly in balance in one year and in surplus in another, but that the position was rapidly deteriorating by 1979. Under the last Labour Government, our performance consistently deteriorated in every aspect of manufacturing output and productivity. We inherited the problems of that Government and Britain's performance has markedly improved in trade, manufacturing output and productivity since then. That is what the Opposition do not like.

Mr. Mans

Does my hon. Friend agree that there is a direct correlation between interference in industry by countries, particularly in Europe, and a reduction in the manufacturing base, whereas countries such as ours which do not interfere increase the manufacturing base? Does he further agree that the only way in which some European countries manage to prop up their exports is by subsidising their industries and that in the long term that can result only in the demise of those industries? Will he ensure that Britain continues to follow the policy of not subsidising industry?

Mr. Oppenheim

Needless to say, I entirely agree with my hon. Friend. As Opposition Members are keen on comparisons with the last Labour Government, I shall give them the example of Triumph Motorcycles. It was a world leader in the 1950s, but it was meddled with and interfered with and had appalling industrial relations in the 1970s. It went bankrupt and the Japanese took the market; but in the 1980s, under a Conservative Government, Triumph set up again and it is expanding jobs and output and exporting to Japan. That is symbolic of the difference between manufacturing then and manufacturing now.

12. Mr. Purchase

To ask the President of the Board of Trade with which European countries the UK has a surplus in both visible and invisible trade. [13515]

Mr. Oppenheim

In 1994, the latest year for which detailed information is available, the UK had an overall surplus, invisibles and invisibles, with the Republic of Ireland, Italy and the Netherlands.

Mr. Purchase

The Minister makes a brave attempt. According to the figures that I have seen, we have a surplus in both areas only with Ireland, which is, I think, 16th in the enlarged Community—all the countries of which, except us, enjoy the protection of the social chapter. Is it not surprising that the Minister claims that we are doing well whereas we are doing rather badly?

Mr. Oppenheim

I think that the hon. Gentleman's figures are a little out of date. As he is quite rightly concerned about our trade position, he will no doubt be delighted to know that our current account deficit with Europe is falling quite sharply. It is much lower than it was 10 years ago, and in the last year for which figures are available our exports were up by 11 per cent.-3 per cent. more than imports were up.

Mr. Butcher

Does my hon. Friend agree that the formation of a north Atlantic free trade area in which both tariff and non-tariff barriers were eliminated would be healthy for western Europe and the eastern seaboard of the United States, would boost the prospect of ports such as Glasgow, Liverpool, Bristol and Cork and would integrate western Europe in the global market and the enterprise culture? Should not that objective be pursued with great vigour by his Department? I draw his attention to the remarks of Commissioner Sir Leon Brittan, my right hon. and learned Friend the Foreign Secretary and officials at the American Department of Commerce which all seem to open the door to the President of the Board of Trade being the champion of this cause.

Mr. Oppenheim

My hon. Friend is absolutely right. If trade barriers produced industrial competitiveness, countries such as India and Brazil would be great industrial powers. It is the fact that those countries followed interventionist and protectionist policies from the end of the war until recently that has caused them great damage. I entirely agree that we need more free trade, not less, and I certainly agree that we must pursue every avenue for opening up trade with the United States.

I hope that my hon. Friend does not underestimate the difficulty caused by many of our fellow members in the EU constantly giving way to vested interests that are crying out for anti-dumping duties and trade barriers. These include occasionally the United Kingdom Commissioner—the former leader of the Labour party. Sadly, the same is true of the United States, which often speaks the language of free trade while practising just the opposite.

Mr. Clapham

Would not the use of regional selective assistance to support successful companies, such as Koyo in my constituency—whose application was turned down—assist the surplus in invisibles? Koyo came to Barnsley in 1992, and it now has a turnover of £25 million. The company wants RSA to double the size of its factory, to increase the work force by 180 and to increase its turnover to £66 million. However, its application was turned down. Will the Minister review that decision and, in doing so, will he see a delegation from the company?

Mr. Oppenheim

I am glad that the hon. Gentleman welcomes the success of inward investment in Britain, and I take seriously his point about the company in his constituency. I understand that the matter is being looked at, and if the hon. Gentleman wants to bring a delegation to the Department of Trade and Industry, we will be glad to see them.

Mr. Marlow

What would be the impact on our balance of trade with our European partners if there was a single currency in central Europe, including Germany, France and, perhaps, Belgium and Luxembourg, while the pound sterling was maintained in the United Kingdom? In particular, what would the impact be on our invisible trade with Europe?

Mr. Oppenheim

The simple answer to a complicated question is that any country unwise enough to join a single currency before the time is right would almost undoubtedly suffer from a massive loss in competitiveness.