§ 3.5 p.m.
§ Lord SELSDONMy Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
§ The Question was as follows:
§ To ask Her Majesty's Government how much money they are borrowing abroad and how much more they intend to borrow.
§ Lord JACQUESMy Lords, I assume that the noble Lord has in mind the financing of our external deficit. The only direct borrowing by Her Majesty's Government for this purpose was the 2.5 billion dollars loan to which the Chancellor of the Exchequer referred in his Budget Speech in March 1974. Drawings on this loan financed some 15 per cent. of the current account deficit of £3.7 billion in 1974; the remainder was financed as to 35 per cent. through foreign currency borrowing by public sector bodies, 40 per cent. through net sterling inflows and the remainder through miscellaneous capital flows. Although there would be an improvement in 1975, the continuing impact of higher oil prices and the downturn in world trade means that the current account deficit is likely to remain substantial in the near future, and this will have to be financed.
§ Lord SELSDONMy Lords, I am most grateful to the noble Lord for his kind and confusing reply, but being a simple man who works in the financial world I have three questions to ask in these inflationary times. First, is the noble Lord aware of the concern generally at home and abroad about the dangerously high level of Government expenditure at home? Secondly, how much is this borrowing costing us? Thirdly, how much are we borrowing abroad at high interest rates in order to loan to other countries at low interest rates, and how much is this costing the nation? Fourthly, by your Lordships' leave, may I make the point that I feel that this borrowing is too high?
§ Lord JACQUESMy Lords, there has been no failure on the part of the Government. The Government, in financing the deficit, are very largely carrying out 988 the policy of the previous Government. It was in fact the previous Government which reintroduced on the 6th March 1973 the exchange cover scheme which permits public bodies, including local government, to borrow abroad what they would have borrowed inside this country. That scheme has been continued, and I would say that it was an excellent thing that the previous Government did introduce it. It has been necessary in the management of the deficit and we have been glad to take advantage of it. So far as the cost is concerned, I should need notice of that question. What was the noble Lord's third question?
§ Lord SELSDONMy Lords, may I, on the second question, submit this point to the noble Lord? Surely it is bad economic management to borrow without knowing how much it is going to cost.
§ Lord JACQUESMy Lords, I would point out that under the exchange cover scheme our local authorities are getting the money at an advantageous rate. That is why, on their own initiative, they are going abroad to raise the money, because they get a lower rate of interest. They share that lower rate of interest with the Exchange Equalisation Fund, and the Exchange Equalisation Fund in turn gives the exchange cover. These loans, although they are negotiated by the public bodies concerned and on the usual commercial criteria, must have the sanction of the Bank of England so that the repayments are properly planned. It is for that reason that although the indebtedness is large we are confident that it is manageable.
§ Baroness GAITSKELLMy Lords, is this not a choice of the lesser evil, whether to borrow or to let unemployment rip? Some of us do not understand all these statistics that the Minister has given, but does it not really come down to this: that the Conservatives are always for letting unemployment rise and we are for borrowing?
§ Lord JACQUESMy Lords, it is an approximation of the choice. We either have to have great disruption in our internal economy or we have to finance the deficit, and in so far as it is not financed by other sources then it has to be financed by borrowing. I would remind the noble Lord—and he may take 989 some comfort from this—that when we last took office there was a substantial deficit and after five or six years there was a substantial surplus.
The Earl of GOWRIEMy Lords, can the Government say under what kind of notice of withdrawal the bulk of this foreign borrowing falls?
§ Lord JACQUESMy Lords, the repayments are planned up to about the latter part of the 1980s.
§ The Earl of LAUDERDALEMy Lords, could the noble Lord confirm the story reported in the Press that the Chancellor of the Exchequer told the TUC and Labour Party Liaison Committee the other day that we were reaching the point where we could no longer borrow on commercial terms to finance the difference between this country's production and consumption, which was a 6 per cent. gap?
§ Lord JACQUESMy Lords, I am not aware of that statement. So far as public borrowing is concerned, we have several options open to us in the future; we have rights on which we have never drawn. For example, we have a drawing right on the general IMF fund of 3½ billion dollars. We have not exercised any of those rights. We have no plans to exercise those rights. There are several other avenues available to us if we need them.
§ The Earl of LAUDERDALEMy Lords, will the noble Lord deny the reports that the Chancellor made the statement to which I have referred?
§ Lord JACQUESMy Lords, I am not going to deny any report which I have not read.
§ Lord HAILSHAM of SAINT MARYLEBONEMy Lords, could the noble Lord tell me, in reference to his original Answer, and the last answer he has given, whether the word "billion" means, as I was brought up to believe, one million million, or as the Americans universally but heretically contend, one thousand million?
§ Lord JACQUESMy Lords, we have been Americanised. It is one thousand million.
§ Lord PARGITERMy Lords, could my noble friend say in more precise terms what are the amounts which it is anticipated local authorities and the nationalised industries will borrow in the foreign markets during next year?
§ Lord JACQUESMy Lords, it is impossible to say what they will borrow in the next year, for the simple reason that the loans are on the initiative of the bodies concerned and are negotiated with the ordinary commercial criteria in mind.
§ Baroness EMMET of AMBERLEYMy Lords, could the Minister answer the third question asked by the noble Lord, Lord Selsdon, as to why it is that we borrow at a greater interest rate than the rate at which we lend?
§ Lord JACQUESMy Lords, I was not aware that we were doing that.
§ Baroness EMMET of AMBERLEYMy Lords, I am talking about the money we borrow at 14 per cent. and the money that we lend out at 7 per cent.
§ Lord JACQUESMy Lords, if it is concerned with trade, then everybody knows, and particularly the Front Bench opposite, that when you are negotiating international agreements on trade you have to make concessions. That is a fact of life.
§ Lord PARGITERMy Lords, arising from my previous question, could my noble friend say whether or not the Government will have in mind some limits within which both local authorities and the nationalised industries will be allowed to borrow on the foreign market?
§ Lord JACQUESMy Lords, there are limits, and every loan must have the sanction of the Bank of England because of the need to plan the repayments. I think one can take it for granted that although the initiative is with the borrowing authority, they first of all make their enquiries at the Bank.
§ The LORD PRIVY SEAL (LORD SHEPHERD)My Lords, the noble Lord, Lord Mackie, despite his bulk, has been struggling to get into the scrummage. May I suggest that we allow him to ask his question, call it a day, and go on to the next?
§ Lord MACKIE of BENSHIEMy Lords, I thank the noble Lord. Could the noble Lord, Lord Jacques, tell the House when he expects this country to be able to repay borrowings out of earned income instead of out of further borrowings available to us? This appears to be the crux of the question: that at some point the Government must look forward to a time when we shall be able to pay our way and pay back these borrowings. Can he tell us by what year they expect that to happen?
§ Lord JACQUESMy Lords, it is quite impossible to say when that is likely to happen. I should say that it very much depends on how long we remain in office.
§ Lord SHINWELLMy Lords, in view of the frequent accusations that come from the other side and from the financial Press owned by the whole Conservative Party of the country that the Labour Government live on borrowing, may I ask my noble friend whether he would state the actual amount of the National Debt and how much of it has been built up in the past by borrowings by various Conservative Governments? We should then know exactly what the position is.
§ Lord JACQUESMy Lords, I think I should need considerable notice of that question.