Manufactured Goods: Balance of Trade (Hansard, 9 June 1988)

§ The Secretary of State for Trade and Industry (Lord Young of Graffham)
My Lords, in the first four months of 1988 there was an estimated deficit on trade in manufactures of £3.9 billion.

§ Lord Dormand of Easington
My Lords, is the Secretary of State aware that the present horrific deficit in the trade of manufactured goods represents a loss of probably 1 million jobs as compared with 1979? What are the Government doing about that situation?

§ Lord Young of Graffham
My Lords, I fail to follow the noble Lord's logic as to how that would show a loss of 1 million jobs as compared with 1979. I am aware that productivity in the manufacturing industry has risen by 50 per cent. as compared with that year and that would account for a proportion of the loss. I am also aware that we have created 1.7 million jobs since 1983. The fact does not appear to lie easily with the noble Lord's contention.

§ Lord Peston
My Lords, bearing in mind the Minister's answer to the supplementary question, can he enlighten the House as to Her Majesty's Government's view of why the trade deficit and the current account deficit are as large as they are? In particular, does he believe that it has any connection with the exchange rate?

§ Lord Young of Graffham
My Lords, the exchange rate is entirely another matter, but I believe that we should look into this issue. In considering a deficit in manufactured goods of £3.9 billion I fear that noble Lords opposite are still living in yester-year, for today wealth creation is carried out in many ways and manufactured goods is only one of them. Secondly, I should say to noble Lords opposite that the United Kingdom's gross assets overseas at the end of 1986 were £730 billion. That compares with a current account deficit today of £2.4 billion. Therefore, there is a great deal of difference between the two figures.

§ Lord Bruce-Gardyne
My Lords, is the crucial point not the balance of trade in manufactured goods but the need to ensure that, whatever the balance of trade generally may be in goods and services, there is a countervailing inflow of capital and that interest rates are maintained at the level required to ensure that that countervailing inflow occurs?

§ Lord Young of Graffham
My Lords, interest rates and exchange rates are another matter from the particular Question which the noble Lord, Lord Dormand of Easington, put to me. At the present time we have a deficit on manufactured goods. We have a smaller deficit overall if we take in invisible earnings. However, we are also at a stage in the economy in which we are investing substantially in new plant and equipment and much of that has an effect on the import figures.

§ Lord Williams of Elvel
My Lords, if the noble Lord believes that the exchange rate and interest rates are irrelevant to the manufacturing trade balance, will he give the Government's view on what is the relationship between the deterioration in the 1492 manufacturing trade balance and the growing mountain of consumer debt?

§ Lord Young of Graffham
My Lords, I assure the noble Lord that I did not say that those figures were irrelevant. I did not comment on them at all.

§ Lord Campbell of Alloway
My Lords, does the Minister not agree that it is a wholly false equation to seek to equate productivity in a manufacturing industry with employment? Has this not been clearly demonstrated even since the days of the Tolpuddle Martyrs?

§ Lord Young of Graffham
My Lords, at a time when we are creating more jobs than the rest of the European Community put together, I believe that we have a record of which we are proud in the way in which British industry and commerce is becoming competitive in today's world.

§ Lord Hatch of Lusby
My Lords, is the noble Lord aware, when he talks about noble Lords on this side speaking from yester-year, that we are speaking from the year when there were not 2½ million people unemployed, as the Government admit, but probably over 3 million unemployed? Has he read the report of the Select Committee on Overseas Trade and noted that section of it which points out that one of the deterrents to the increase in manufacturing exports from this country is the low purchasing power of third world countries, which are a market to which British exporters could turn their attention?

§ Lord Young of Graffham
My Lords, the latest figures for unemployment show it standing at 2,450,000 and not a figure of 3 million, which the noble Lord alleges.

§ Lord Molloy
My Lords, the noble Lord has acknowledged that there is a deficit which may not be terribly disturbing but nevertheless exists, and if it continues it will inevitably have some deleterious effect on employment. Can he say what may be undertaken to prevent that happening?

§ Lord Young of Graffham
My Lords, I am not sure that I follow the noble Lord that if the deficit were to continue for some time it would have any effect on employment at all. We are in a position where our economy is growing stronger than any other economy. There are stages during that growth in which we import substantially in order to refit industry, which is happening at present. We have to look at all these figures and deficits in the light of the assets of the United Kingdom. I repeat that gross assets overseas of the UK are some £730 billion. That should be compared with a current deficit this year of some £2.4 billion.

§ Lord Hatch of Lusby
My Lords, I asked the noble Lord two questions but he did not answer the second one. Will he have the courtesy to do so?

§ Lord Young of Graffham
My Lords, I understand that it is my privilege to answer only one question at a time. I agree with the noble Lord that I have read 1493 that part of the report of your Lordships' Select Committee. I am not sure that I necessarily agree with it since some two or three years have now passed since that committee reported to your Lordships.

§ Lord Dormand of Easington
My Lords, the Secretary of State said that he failed to see the logic of my question. Is not the main cause of the deficit the fact that the manufacturing base of this country is still smaller than it was in 1979 and there has been a failure to invest in the manufacturing goods industry?

§ Lord Young of Graffham
My Lords, in each of the past four years we have seen the record of investment in manufactured goods broken as each year we invest more and more. I suggest to the noble Lord, Lord Dormand of Easington, that he should travel overseas and there inquire about the reputation of British manufactured goods. Compared with 10 years ago he will find that we are today recovering our reputation to deliver on time, to provide quality goods and to restore the reputation of which we used to be proud but which, alas, we lost in the 1970s.