HL Deb 24 January 1974 vol 348 cc1571-4

3.10 p.m.

LORD DAVIES or LEEK

My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government how much they have borrowed from foreign sources to meet the deficit in the balance of payments, and whether they can tabulate the sources of these borrowings.

THE MINISTER WITHOUT PORTFOLIO (LORD ABERDARE)

My Lords, the Government have themselves undertaken no such overseas borrowing.

LORD DAVIES OF LEEK

I beg the noble Lord's pardon, but because the Front Bench were talking I could not hear the noble Lord. Would he repeat that Answer?

LORD ABERDARE

Certainly. My Lords, the Government have themselves undertaken no such overseas borrowing.

LORD PARGITER

Would the noble Lord—

LORD DAVIES OF LEEK

My Lords, may I ask my supplementary? Is the noble Lord telling Britain that we are not borrowing from abroad at all?

LORD ABERDARE

My Lords, I am telling Britain that the Government are not borrowing at the moment from abroad. There are others—public corporations, the nationalised industries, and local authorities—which are borrowing; but not the Government.

LORD PARGITER

That was the question I wished to ask. How much have these other bodies borrowed on the advice of the Government?

LORD ABERDARE

My Lords, between March 6, 1973, and December 31, 1973, nationalised industries and local authorities have borrowed 2,495 million dollars under the exchange cover scheme.

LORD DAVIES OF LEEK

My Lords, is the noble Lord aware that I knew quite concisely what was implied in the Question, and it was rather unfair to answer the Question in that way. But may I now develop this point by asking what the Government are going to do to try to maintain their position in the famous "snake", in view of the fact that the French are now floating the pound—

SEVERAL NOBLE LORDS: Oh!

LORD DAVIES OF LEEK

—I mean the franc, my Lords: we shall need a diving bell to save the pound. As the franc is now being floated, does not this make our balance-of-payments problem greater still? What conferences are we still having with the French to try to stabilise the position?

LORD ABERDARE

My Lords, there are many factors in the present situation which require constant attention and study. I do not think that the noble Lord's specific question follows from the Question on the Order Paper. All I would say is that the borrowing by the nationalised industries and the local authorities has brought in a considerable amount of foreign exchange which has helped our balance of payments.

LORD POPPLEWELL

My Lords, is the noble Lord able to give percentages for nationalised industries and private industry?

LORD ABERDARE

My Lords, this figure relates to nationalised industries and local authorities, not private industry.

LORD BESWICK

My Lords, would the noble Lord agree that this is another aspect of the mess which we shall have to clear up in the years ahead? Can he say, although the long-term effect is as he stated, what will be the short-term effect on the balance of payments of the servicing of these loans?

LORD ABERDARE

My Lords, the interest on these loans amounts to some 200 million dollars per annum, but one has to think of that in relation to our "invisible" surplus, which in round figures is 2,000 million dollars per annum. So far as the merit of this borrowing is concerned, of course it enables the nationalised industries and the local authorities to borrow at rates which are less than those at which they would have to borrow if they borrowed from the Treasury.

LORD SHINWELL

My Lords, can the noble Lord say how the Government propose to meet the deficit in the balance of payments without borrowing in the next two or three years? Are they not bound to go to the International Monetary Fund in order to obtain sufficient funds to cover the deficit to some extent? Furthermore, can he say whether it is possible to rely on the nationalised industries' borrowing from overseas, as they are doing at present in order to counter the balance-of-payments deficit?

LORD ABERDARE

My Lords, I do not think the noble Lord will expect me to pronounce on that particular matter with much authority. I can only say what my right honourable friend the Chancellor of the Exchequer has already said: that the Government would not hesitate to use our sizeable borrowing capacity, if this was judged necessary, to borrow from the I.M.F.

LORD HARVEY OF PRESTBURY

My Lords, is it not a fact that the Opposition have always contended that local government and nationalised industries should be allowed to borrow in the open market, wherever it might be? And why are they now complaining?

LORD ABERDARE

My Lords, I cannot think, because the practice in fact started under the Labour Government.

LORD DAVIES OF LEEK

My Lords, is the noble Lord aware that an analysis of the situation in the Digest of Statistics, Tables 142, 143, on Current and Capital Account, indicates that we are in a very similar position now to the classical problem of 1931, of lending and borrowing on terms which are dangerous to the economy; and this we want somehow rectified?

LORD ABERDARE

My Lords, I have given a few figures; and we do not think the situation there is dangerous to the economy. What is dangerous to the economy is the situation that has now arisen with the greatly increased price of oil.

LORD HANKEY

My Lords, in order to obtain a balanced view, is it not necessary to have the figure for short-term and long-term capital flows from this country abroad which have to be set off against the other flows which the Minister has mentioned? Has he any figures for them?

LORD ABERDARE

Not without notice, my Lords.