Balance of Payments (Hansard, 23 February 1988)

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

§ The Parliamentary Under-Secretary of State, Department of Transport (Lord Brabazon of Tara)
My Lords, my right honourable friend the Chancellor of the Exchequer will be making a new forecast at Budget time.

§ Lord Ezra
My Lords, is the noble Lord aware that whereas the Treasury had previously forecast an outturn for this year of something of the order of a deficit of £3.5 billion, most external experts consider it to be £6 billion on the balance of payments? That therefore would be a very serious situation bearing in mind that at the present time the rate of imports is three times in volume the rate of exports. Have the Government in mind any policies which will stem the situation by stimulating import substitutions?

§ Lord Brabazon of Tara
My Lords, as I said, there will be a new forecast in three weeks for the current account deficit at the time of the Budget. However, as regards import figures, recent figures for import volumes have been very erratic. It is not surprising that imports are growing relatively strongly, given the rapid growth in United Kingdom domestic demand and activity. The rise in imports is not confined to consumer goods. Rising imports of materials, semi-manufactures, intermediate and capital goods reflect rising output, stock building and investment rather than a surge in consumer spending.

§ Lord Barnett
My Lords, does the Minister accept that the figure of £3½ billion or approximately three-quarters of 1 per cent. of GDP which the Chancellor has forecast for the autumn is not especially excessive in current circumstances? Indeed, it is well within our capacity to sustain. However, does the Minister also accept that there is genuine concern in many quarters in the City and elsewhere about the level of consumer demand? Is that concern shared by the Department of Trade and Industry, and, if not, why not?

§ Lord Brabazon of Tara
My Lords, I accept the first part of the noble Lord's supplementary question. The figure of three-quarters of 1 per cent. as a percentage of gross domestic product is not that great, particularly when compared with figures from, for example, the United States, Germany and Japan, where trade balances are some 3 per cent. to 4 per cent. of gross domestic product, or indeed in comparison with our own gross domestic product in the mid-1970s, which was also 3 per cent. to 4 per cent. of GDP.
In reply to the second part of the noble Lord's question about concern in the City over possible overheating of the economy, I can do no better than point to the CBI's most recent survey, which was published yesterday. That survey showed a record number of firms reporting export order books above normal. The CBI expects export orders and deliveries to rise in the next four months.

Lord Bruce of Donington
My Lords, is the noble Lord aware that CBI forecasts tend to be somewhat erratic according to the season? Will he give the House an assurance that when the Chancellor makes his forecast, that will take fully into account the increase in net contribution by the United Kingdom 1046 to the EC budget following the recent somewhat questionable activities in Brussels?

§ Lord Brabazon of Tara
My Lords, the noble Lord tempts me to go further than the Question on the Order Paper in discussing the EC budget agreement. However, I am sure that when my right honourable friend makes his Budget forecast he will take everything into account.

§ Lord Hatch of Lusby
My Lords, does the noble Lord agree that the problem of the current account deficit is in line with the forecast made by the Select Committee of your Lordships' House on overseas trade some two to three years ago? Does he agree with his right honourable friend the Minister for Energy in saying that oil revenues, which have bolstered the revenues of this Government, have been used to finance unemployment payments for the numbers of unemployed people, which have been rapidly increasing since the Government came into office?

§ Lord Brabazon of Tara
My Lords, I am not sure that I can relate what the noble Lord has just said to any statements which may have been made by my right honourable friend. As regards the noble Lord's concern about manufacturing industry, the Government are very pleased that the volume of manufacturing exports was 9 per cent. higher in the fourth quarter than it was a year ago. Output is also up by 5½ per cent., comparing the fourth quarter with a year earlier. As for the proceeds of North Sea oil, I point to the enormous increase in UK net overseas assets, which is now the largest of those of all major countries as a proportion of GDP.

§ Lord Mackie of Benshie
My Lords, the Minister has rightly said that the rise in imports was due to manufacturing, raw materials, and so on, as well as to consumer goods. Is he able to give us a breakdown between consumer goods and raw materials?

§ Lord Brabazon of Tara
Not without notice, my Lords. However, I may be able to produce some figures and perhaps write to the noble Lord.

Lord Bruce of Donington
My Lords, is it not the case that imports of raw materials into this country, expressed as a percentage of imports, is under 16 per cent?

§ Lord Brabazon of Tara
My Lords, as I have said, I do not have those figures with me. However, in my earlier reply I did not concentrate solely on the import of raw materials. I also mentioned the import of semi-manufactures, intermediate and capital goods, as well as stock building and investment.

§ Lord Tordoff
My Lords, is it not strange that the noble Lord has given an Answer such as that without having the details at his fingertips? Surely it is not acceptable in your Lordships' House to put up a smokescreen without the figures to back it up.

§ Lord Brabazon of Tara
My Lords, if I came to the House with all the figures which might conceivably be 1047 asked for on a Question such as this one, my brief would be several times larger than the one I have.

§ Lord Whaddon
My Lords, is the noble Lord aware that his answers appear to many of us on these Benches to be unduly complacent? With the inevitable decline of oil in the next decade or so, the balance of payments is going to undergo a dramatic reverse which will eat up the reserves of which the Minister is so proud.

§ Lord Brabazon of Tara
My Lords, I am by no means complacent about the figures. I attempted to point out some of the good points about the figures, such as the large increase in exports of manufactures. We have held our share in manufacturing industry in world terms since 1981, compared with many decades of decline before that.