HL Deb 24 October 1988 vol 500 cc1357-8

Viscount Hanworth asked Her Majesty's Government:

To what extent they think that the extra money available to consumers from recent tax cuts has been spent on buying British manufactured goods as opposed to foreign imports.

The Parliamentary Under-Secretary of State, Department of Transport (Lord Brabazon of Tara)

My Lords, the share of taxes in GDP was not changed by the Budget, so the impact on total spending is likely to be small. I expect cuts in tax rates announced in the Budget to improve the United Kingdom's economic performance and hence to increase output and exports.

Viscount Hanworth

My Lords, I thank the noble Lord for that reply. However, is he aware that many of us believe that the majority of the tax cuts which have gone into the consumers' pockets have not been spent in the United Kingdom? If that is so, does not the Minister agree, bearing in mind our problems with overseas payments and our difficulty in providing adequate funds for education and other urgent projects, that it is folly to consider any further tax cuts, as I understand the Government are still doing?

Lord Brabazon of Tara

No, my Lords, I could not disagree more with the noble Lord. Tax cuts over the past few years have revitalised the economy in this country, and it seems to me that the more of them the better.

Lord Boyd-Carpenter

My Lords, will my noble friend note that the views of the Liberal Party appear to be that as the citizen is not fit to use his own money, he must have it taken away in taxation?

Lord Brabazon of Tara

My Lords, I am not certain whether the Question tabled by the noble Viscount, Lord Hanworth, is in fact from the Liberal Benches. It is fairly typical of the views held widely across the Chamber.

Lord Bruce of Donington

My Lords, is it not the case that the tax cuts referred to in the Question have gone to swell consumer demand and that consumer demand, particularly for manufactured goods, has been reflected in the ever-increasing deficit in our overseas trade, specifically with Germany? Does not the noble Lord agree that it is high time that the Government apologise to the noble Lord, Lord Aldington, and his committee, who predicted precisely what would happen?

Lord Brabazon of Tara

My Lords, the report of my noble friend Lord Aldington is another matter to the Question on the Order Paper. The fact is that manufacturing industry is performing extremely well at the moment. Exports and manufactures in the three months to August are 8.5 per cent. higher than a year ago, and manufacturing productivity has increased by 7.5 per cent. in those three months. Clearly some of the money which people have in their pockets will be spent on imported goods; some will be spent on home produced goods; and some will be saved. However, as my noble friend Lord Boyd-Carpenter pointed out, surely the best person to judge how to spend his money is the person whose money it is—that is, the taxpayer.

Baroness Seear

My Lords, is the noble Lord saying that the sum total of decisions by consumers in this country necessarily adds up to what is best for the economy as a whole? Surely there is a strong argument for saying that the balance of payments deficit is largely as a result of too much credit and too much money in people's pockets. While I am on my feet, may I, through the Minister, inform the noble Lord, Lord Boyd-Carpenter, that most regrettably the noble Viscount, Lord Hanworth, went somewhere else.

Lord Boyd-Carpenter

Congratulations, my Lords‡

Lord Brabazon of Tara

My Lords, far be it from me to interfere by commenting on the last part of the supplementary question put by the noble Baroness. However, measures have been taken recently, as the noble Baroness will be aware, to raise interest rates, and that should choke off some of the present excessive demand.

Lord Underhill

My Lords, in view of the emphasis in the Question to the importance of buying British manufactured goods, as opposed to foreign imports, do not the Government consider that it is somewhat unfortunate in the interests of British employment and British manufacturing firms that British Airways should have placed a substantial replacement plane order with Boeing of America instead of ordering the part-British European Airbus?

Lord Brabazon of Tara

My Lords, that is another question. It must be a matter for British Airways to decide where best its commercial interests lie, whether BA is in the private or the public sector. Without knowing the details of the deal—and I do not—it would be unwise for me to comment upon it.