Balance of Payments: Current Account (Hansard, 21 May 1986)

§ Lord Dean of Beswick
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ Lord Brabazon of Tara
My Lords, in the first quarter of this year the current account showed a surplus of nearly £1 billion. The figures for March which showed a current account deficit of £538 million were disappointing, but are not indicative of the underlying position, which continues to be one of overall surplus.

§ Lord Dean of Beswick
My Lords, taking those figures as an indication of the economic barometer, is the noble Lord the Minister aware that the figures issued by the Government today show that over the first quarter, apart from an increase in oil production of 5 per cent. (the highest oil production we have ever had) the economy grew by 0.4 per cent. and manufacturing output fell by 1 per cent? Is that not a dangerous trend? Does it not indicate that the Government, even with the fall in oil prices, are allowing an increase to balance their books? Is that not a dangerous way to run the economy when the manufacturing base is still falling while service industries are increasing?

§ Lord Brabazon of Tara
My Lords, with regard to the production figures which the noble Lord mentions, the figure issued today is obviously disappointing. We are still, however, looking for an overall balance of trade surplus for the year of some £3 billion. As regards manufacturing industry, exports of manufactured goods last year were at a record level in terms of both volume and value. Of course, imports have grown more than exports. Half of the deterioration in the balance of manufactures in the first quarter reflects trade in erratic items such as aircraft and precious stones. They should not be taken as entirely indicative of the trend.

§ Lord Thorneycroft
My Lords, will the noble Lord the Minister include among his conclusions maintaining a determination to resist all pressure from opposition parties to depart dramatically from Her Majesty's Government's economic policies, which would only have the most disastrous results upon our current balance of payments?

§ Lord Brabazon of Tara
My Lords, I entirely agree with my noble friend.

§ Lord Williams of Elvel
My Lords, is the noble Lord aware that on a comparison of first quarter 1986 with first quarter 1985 the trade deficit on manufactured goods worsened by 26 per cent. to an all-time record of £1.43 billion; the volume of exports of manufactured goods dropped by 2.5 per cent; the trade balance on semi-manufactures went from surplus into deficit; manufacturing output fell by 1 per cent; and manufacturing productivity showed no improvement? Are those the results the noble Lord, Lord Young of Graffham, had in mind when he said to your Lordships on 20th March: The economy has taken the unprecedented collapse of the oil price in its stride".—[Official Report, 20/3/86; col. 1048.]

§ Lord Brabazon of Tara
My Lords, the noble Lord has obviously done his homework on the figures. I have done my homework on the figures as well. I cannot argue with them. The figures are in the Printed Paper Office of your Lordships' House for all your Lordships to see. As I said in my original Answer, the first quarter figures for this year should not be taken as indicative of the overall position. We are still predicting a current account surplus of £3 billion to £3.5 billion for the year as a whole.

§ Lord Parry
My Lords, as the contribution of the service sector and particularly the tourism side of the economy was phenomenal last year and as it is likely to fall in the current year, is the noble Lord concerned that there will be a gross imbalance in the economy?

§ Lord Brabazon of Tara
My Lords, I do not agree that the contribution from the tourist sector will fall this year. I do not have the actual figures with me. I understand, however, that we are predicting a further small increase in tourism this coming year.

§ Lord Molloy
My Lords, bearing in mind the point made by the noble Lord, Lord Thorneycroft, that this Government's policies would appear to be very good for the nation, can the Minister say at what period and under what government since the end of the last war has there been a more disastrous situation than we face today? Will he give a clear answer to that real and valid question?

§ Lord Brabazon of Tara
My Lords, I have to tell the noble Lord that the trend in the balance of payments in manufactured goods has been getting worse for the last 20 to 30 years.

§ Lord Gisborough
My Lords, does my noble friend not agree that so long as the rise in wages exceeds the rise in inflation this will make the situation much worse? What extra will be done to try to keep wages in proportion?

§ Lord Brabazon of Tara
My Lords, my noble friend makes a valid point. I do not wish, however, to become involved in an economic debate this afternoon. I have given an answer to the Question on the Order Paper which relates to the current account balance of payments.

§ Lord Ezra
My Lords, would the noble Lord not agree that, in the long run, we need to restore a positive balance in our visible trade exports apart from oil? Will he indicate, therefore, whether he considers that present policies will lead to that desirable result?

§ Lord Brabazon of Tara
Yes, my Lords, I agree that we should like to see a positive trade in current account in visibles. It is inevitable that part of the revenues from oil, the surplus on services and money from increased manufactured exports will be spent on imports. Some of these imports are in intermediate goods to fuel growth, on capital goods to invest for the future and on consumer goods to increase freedom of choice. This is what trade is about.

§ Lord Boyd-Carpenter
My Lords, will my noble friend invite the attention of the noble Lord, Lord Molloy, in answer to his question, to the occasion in 1977 when the Labour Government so mishandled our affairs it was necessary to bring in the IMF to bail us out?

§ Lord Brabazon of Tara
My Lords my noble friend is, of course, quite right. That is certainly not going to happen under this Government.

§ Lord Hatch of Lusby
My Lords, do not the figures that the noble Lord has given for the deficit in March, plus the evidence given by many noble Lords who have already spoken, relating to the fall in the output of manufacturing over the past year show how ridiculous it was when the Chancellor and, following him, the noble Lord, Lord Young, claimed that we had easily weathered the fall in oil prices and sought to dismiss the findings of your Lordships' Select Committee on Overseas Trade?

§ Lord Brabazon of Tara
My Lords, I think that I have heard that speech before. I repeat that last year exports of manufactured goods, by both volume and value, were at an all-time record. We expect that to be improved upon this year.

§ Lord Dean of Beswick
My Lords, would the Minister not agree that it is clear, from all the figures bandied about today, that a further fall in the price of oil of the dimension mentioned by my noble friend and colleague Lord Williams would be absolutely disastrous for our economy?

§ Lord Brabazon of Tara
My Lords, the fall in the price of oil has advantages for the economy as well as disadvantages for the balance of trade, obviously. It makes our manufactured goods more competitive in a world market that should also benefit from the fall in the price of oil. The March figures showed a surplus in oil of £400 million. We predict that that surplus will probably be maintained for this year.