HL Deb 26 November 1986 vol 482 cc584-90

5.28 p.m.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)

My Lords, it might be for the convenience of your Lordships if, with permission, I repeat in the form of a Statement the reply given in another place by my honourable friend the Minister for Corporate Affairs in respect of the invisibles trade estimates for October published yesterday. The Statement is as follows:

"Statistics of invisible trade are compiled by the Central Statistical Office mainly from quarterly and annual surveys of businesses and individuals engaged in invisible trade transactions. This information becomes available much less frequently than the corresponding information for visible trade. Estimates of the invisible balance for the third quarter of 1986 and the month of October were calculated by the statisticians of the Central Statistical Office on the basis of the latest information available to them."

My Lords, that concludes the Statement.

5.30 p.m.

Lord Williams of Elvel

My Lords, we are most grateful to the noble Lord the Minister for repeating in the form of a Statement the reply given by his right honourable friend in another place. The Private Notice Question which gave rise to the Statement comes at a convenient time. I hope the noble Lord will recognise this. It is convenient because the balance of invisibles has suddenly shot up in the estimate to £900 million in October. I hope the noble Lord will accept that we mean no criticism of the statisticians in the Central Statistical Office if we ask certain questions on the Statement which the noble Lord has just made.

My first question is this. Why, in the view of the noble Lord, is the City so sceptical about the estimate of invisibles which has just been published? The Financial Times has reported that the City greeted this estimate with widespread scepticism. My second question is this. Could the noble Lord tell us, since we are dealing with estimates, what is the estimated effect of the recent devaluation of sterling, and what is the estimated real growth in what is referred to in the Financial Times article, to which I have just referred, as the detected buoyancy in all sectors of invisible trade"? This second question refers to what I believe is a necessity to re-establish the integrity of Government statistics so that the financial markets may receive proper signals, and not signals that are immediately discounted. Is it not time that the methodology for calculating these invisible earnings is published fully and frankly so that we can all examine the statistical base and how it is compiled?

In the DTI notice we have a welter of statistics about visible trade; we have one line on the invisible balance. I do not have to remind the noble Lord the Minister that if this were a private prospectus this figure would be subject to audit and examination by an outside firm. It is not for me to suggest that Government statistics, and particularly those compiled by the Central Statistical Office, are in any way false. However, I believe it is time that the integrity of the statistics should be established and the methodology fully published. I hope that the noble Lord will be able to reply to that.

Lord Ezra

My Lords, I too am glad that we have the opportunity of discussing the most recently published current accounts results for the month of October. It is most desirable that we should improve our balance under any heading, whether it be visibles, invisibles or anything else. Nevertheless, the changes indicated in the figures for the month of October raise one or two questions. I should therefore like to follow on the questions already posed by the noble Lord, Lord Williams of Elvel.

My first question is this. Having looked carefully at the press notice issued by the DTI, I sec in a footnote that invisibles for July to September are estimates based on partial information, and are subject to revision when the balance of payments estimates for the third quarter of 1986 are published on 4th December. If more accurate figures will be available on 4th December, why should further estimated figures be introduced in a document dated 25th November? Would it not have been better to give us figures based on a more accurate quarterly survey (to which the noble Lord, Lord Lucas of Chilworth, has referred) on 4th December?

Secondly, it is an unfortunate fact that, although invisibles are evidently contributing very much more, there is a further deterioration in our non-oil visible trade and the figures contained in this latest published document show that for ten months of this year the deficit on non-oil visibles amounts to 1 1viji7 billion, compared with just over £10 billion for the whole of last year. This deterioration in our non-oil visibles is continuing all the time and is bound to cause concern. I hope that the noble Lord will comment on this aspect of the figures which have just been published as well as on the invisibles, bearing in mind that at the same time the contribution from oil is less than half what it was last year.

Lord Lucas of Chilworth

My Lords, I am grateful to the noble Lord, Lord Williams, and to the noble Lord, Lord Ezra, for their reception of the Statement I have just made. As regards the first question of the noble Lord, Lord Williams, concerning the scepticism of the City as reported in the newspapers, on occasions such as these I prefer not to comment upon what newspapers report as being the view of certain bodies. I frankly do not believe that the City is sceptical about the figures.

As regards the effect on devaluation, perhaps I may say that the prospects for exports are good. This view is endorsed by the CBI. There are two reasons for the improvement in the prospects. One reason is a general expectation among forecasters that world trade will increase next year, and certainly one effect of the fall in sterling this year is that United Kingdom exports will be even more competitive than they are already. Imports are high although there are some signs that the rise is levelling out. One of the effects of the fall in sterling is that goods produced in the United Kingdom will be more price competitive and imported goods will be less so. There is then an opportunity for industry and individuals to take advantage of that situation.

As regards the integrity of statistics, I think it is well known to noble Lords how these figures are prepared. The methodology is published fully and frankly in an annual publication, the Pink Book, concerning the balance of payments.

In answer to the first question of the noble Lord, Lord Ezra, in which he drew attention to the footnote in the press notice, the monthly figures are an estimate or projection. Invisibles for July to September are estimates based on partial information subject to revision when the balance of payments estimates for the third quarter of 1986 are published on 4th December. I think he would find it rather odd if the Government did not take advantage of figures produced by statisticians, whether they are estimates or otherwise. Both the noble Lord and the House will recognise that where invisibles are concerned, much of the information is based on annual surveys. It takes something like 12 to 18 months for the full effect of those surveys to be brought home. As soon as such information becomes relevant, it is added to the figures, unless the change is a minor one. In one month in the last quarter invisible earnings on paper were down to £600 million, but the figure revealed was £653 million. We felt that that was not a significant amount to alter the figure for one month, so we therefore used a quarter.

The noble Lord drew attention to the press notice which set out, as it always does, the balances on visible trade. I think the noble Lord will forgive me, particularly since there is another debate to take place, if I restrict my responses this afternoon to the matter in front of us concerning invisibles. The noble Lord knows very well that if he cares to table a Question on the deficit, or indeed on any matter concerning trade in manufactured goods, I shall be delighted to answer him.

Lord Boyd-Carpenter

My Lords, is my noble friend aware that those of us who have worked in the relevant departments of government have the highest regard for the integrity and efficiency of the statisticians who produce the large number of statistics required by government, and have learned to have very great confidence in them? On a lighter note, has my noble friend also noted how dejected the noble Lord, Lord Williams of Elvel, always looks when there is good news?

Lord Lucas of Chilworth

My Lords, I am grateful to my noble friend Lord Boyd-Carpenter. I should like to echo most sincerely his complimentary remarks about the statisticians at the Central Statistical Office. They deal professionally with a multitude of information that comes to them from a variety of sources; and they are quite outside the influence of Ministers, certainly of those in the Department of Trade. This was evidenced in the figures produced by the Central Statistical Office in August, which were less than happy, as I think my noble friend will agree.

With regard to my noble friend's second question, I have always maintained that in a changing relationship across the world in terms of trade, manufactured and invisible, we have to take advantage where we can of our skills. Indeed, the City does just that, and has an exceptionally good record of earnings, which have made a significant contribution to the economy and to the wellbeing of our country.

Lord Diamond

My Lords, it may be a little unfortunate for the noble Lord, but does he recollect the speech I recently made praising the work of and again accruing from the financial services and services generally? He will recognise that I have every sympathy with that aspect of our economy. Is he further aware that I share the views of the noble Lord, Lord Boyd-Carpenter, about the excellent service provided by the Central Statistical Office to departments and, indeed, to Royal Commissions when they have need for continual contact, as did one of which I had the privilege to be chairman?

On that basis, perhaps I may ask the noble Lord two questions. It is of course the case that the Government will have gone into these figures very carefully and will know the causes of any unusual movements. They will have inquired into them. Will the noble Lord therefore explain to us why in this one month there has been an increase of enormous proportions on the net balance of invisibles—speaking offhand, something like £2½ million over £6½ million; about 35 per cent. in one month—whereas those of us who have some slight experience of it always had the feeling that these invisibles went on from month to month in a fairly regular way? It was unusual, for example, for Lloyd's to write a policy that was ten times as big as it had written before, thereby achieving some kind of balance which would help the invisibles in a most extraordinary way. It is not as though we are suddenly exporting aeroplanes or importing diamonds, which can throw the visible figures out of kilter. It is quite against normal expectations.

My second question is related to that principle of normal expectations. Can the noble Lord refresh our memory as to the last occasion or occasions when, in mid-stream as it were, the figures for invisibles were altered to this extent in this way?

Lord Lucas of Chilworth

My Lords, I am grateful to the noble Lord, Lord Diamond. I recollect a number of speeches he has made in which he gave due credit to the financial services, which, as I have said, make a significant contribution to our wellbeing. Again, on behalf of the statisticians in the central office, I am glad to accept his remarks.

The noble Lord asked whether the Government will go into the figures. Let me make it quite clear. The Government will of course read the figures and draw what conclusions they can. It is not a question of the Government going into the preparation of the figures. My noble friend Lord Boyd-Carpenter made that point quite clear. There were no significant differences in October; for example, there was not a large purchase of valuable metals or the sale of an extraordinary number of aeroplanes. The difference in the figures—the noble Lord is referring to the previous publication, where we had set down an estimated figure on the invisible balance of £600 million—is due, as I suggested in earlier responses, to the availability of more up-to-date information. This has suggested that those estimated balances were unrealistically low at £600 million, and there has been a revision upwards to £800 million.

The figures are the result of large flows both inward and outward. The balance therefore has to be subject to fairly large revisions when that occurs. I have to tell the noble Lord that I cannot refresh his memory or indeed my own by telling him when there was (and I use his words) such a "significant revision in the figures".

Lord Harris of Greenwich

My Lords, is the noble Lord aware that some of us find it mildly surprising that the noble Lord, Lord Boyd-Carpenter, regards the continued deterioration in the British balance of payments as good news in some way or another? Perhaps I may ask the noble Lord one specific question. While the Government are not responsible for what appears in the newspapers, does he agree that the series of statements in the serious financial press this morning indicating widespread disbelief in what has been presented as this remarkable improvement in our invisible earnings in this month makes it even more necessary for the Government to have given a far more detailed explanation yesterday of why there was this massive apparent change in our fortunes? Although the Government are not responsible for what appears in newspapers, is he aware that many people who have to take a view on sterling read these newspapers, and that therefore the negative speculation that has appeared in the press over the past 24 hours could be seriously damaging to the interests of this country? Could that not have been avoided if the noble Lord's own department had been more careful about the way in which the figures were announced yesterday?

Lord Lucas of Chilworth

My Lords, the noble Lord, Lord Harris, is quite unfair when he says that the department should have taken a good deal more care in the release of the figures yesterday. Your Lordships will know that some years ago there was great argument about Governments releasing figures on days which particularly suited their political convenience—when, for example, there was a by-election. It was agreed that the Government would set down at the beginning of each year the dates upon which the quarterly figures would be released. So there is no question of my department having, as it were, control of the date and time of release of the figures. An undertaking had been given—an undertaking to which my department kept.

I do not answer for the press. I should very much have preferred the City to have had an opportunity to study the detail in the notices which will be issued by the Central Statistical Office on 4th December. This will give confirmation of the third quarter, and, by virtue of that, the first and second quarter's figures. I believe the City will then be in a very much better position to assess the situation.

There are those abroad—and I do not mean outside this country—who will seize upon anything that reflects credit on various parts of our economy, those who work in industry, the invisibles, and trade and commerce, and seek to put the worst complexion on it. There is no doubt at all, as I said earlier, that the invisibles balance, which has been revised upwards, reflects the continued worth of that sector of our economy, and all credit should go to those who are engaged in that sector.

Lord Boyd-Carpenter

My Lords, can my noble friend explain why the noble Lord, Lord Harris of Greenwich, does not regard a very substantial improvement in the balance of payments as good news?

Lord Lucas of Chilworth

My Lords, it is not for me to give explanations as to why the noble Lord, Lord Harris, should present his argument in that way. I do not want to be difficult with your Lordships—perhaps it is not for me to say—but I feel I cannot help your Lordships further in explaining and giving an answer to the specific Question which was put down in another House. I really wonder whether I can help your Lordships further this afternoon.

Lord Williams of Elvel

My Lords, perhaps I may ask the noble Lord whether he would be kind enough to help me a little further with my first question—how much the increased estimate is due to the devaluation of the pound sterling relative to other currencies, and how much it is due to the buoyancy in invisible earnings.

Secondly, I stress to the noble Lord the importance of the methodology. It was pointed out by the noble Lord, Lord Ezra, and rightly, that invisibles are taking up the balance, as it were, as our visible trade goes into serious imbalance. It is therefore all the more important that outside commentators should be able to see exactly how these figures are arrived at, and on what basis.

Thirdly, perhaps I may reply to the noble Lord, Lord Boyd-Carpenter, and remind him that we are dealing with estimates and not with facts. I had to remind the noble Lord the other evening that I like dealing only in facts.

Lord Lucas of Chilworth

My Lords, since the noble Lord opposite prefers to deal in facts, and since he invites me to make comments and give figures on a series of estimates that are before your Lordships, I think I shall resist the temptation.

Lord Ezra

My Lords, I think we are all still interested in knowing at the earliest date the reason for this apparently happy development of moving up from £650 million surplus in June to the figure of £900 million in October. Am I right in assuming that when further information is available on 4th December a detailed background to this situation will be revealed?

Lord Lucas of Chilworth

My Lords, the quarterly figures normally released contain very much more information than is provided in the monthly figures. I am quite sure that the noble Lord will then be satisfied.