§ Lord Wyatt of Weeford asked Her Majesty's Government:
§ What is the estimated current value of the United Kingdom's overseas assets and of the interest and dividends derived from them; and what were the figures for 1986.
The Paymaster General (The Earl of Caithness)My Lords, the latest estimate of identified UK net overseas assets at the end of 1988 is £94 billion.
145 Interest, profits and dividends from these net assets were £5.6 billion in 1988. In 1986 the level of identified UK net overseas assets was £113 billion and interest, profits and dividends were £5.4 billion.
§ Lord Wyatt of WeefordMy Lords, does the noble Earl agree that that shows that our overseas financial position is still in a healthy state and that much of the worry about our alleged balance of payments deficit is totally unnecessary, particularly as £12 billion worth of deficit recorded in the balance of payments last year was due to wrong accounting and never occurred at all?
The Earl of CaithnessMy Lords, the noble Lord is absolutely right to remind the House of the strong position of the UK net overseas assets. The UK net overseas assets are the highest of all the major countries as a percentage of GNP. That is something of which we can all be proud. When one thinks of the figure that I have just given to the House of £94 billion at the end of 1988, it is worth recalling that, when we came to office, the Labour Party had left us with only £13.5 billion.
§ Lord Hatch of LusbyMy Lords, will the Minister tell the House how much of our overseas assets were used last week by the Chancellor in his abortive attempt to bolster up the pound?
§ Lord Callaghan of CardiffMy Lords, as it is the case that the Government often give selective statistics, as the Minister has just done, would the noble Earl care to compare the deficits in 1979 with the assets so that we get a true figure?
The Earl of CaithnessMy Lords, I was quoting from the pink book, which, as I understand it, has the most reliable statistics that we have.
§ Lord Callaghan of CardiffMy Lords, with respect, that does not answer my question. The noble Earl has compared a low figure in 1979 (when this Government came to power) on the asset side. Would he now give the corresponding figures on the side on which we owe money to overseas countries?
§ Lord Callaghan of CardiffMy Lords, is it fair for the Minister to come to this Chamber and cast such aspersions without having the complete figures at his disposal?
§ Lord Wyatt of WeefordMy Lords, does the noble Lord deny that in 1979 the Labour Government had borrowed an enormous sum from the IMF and elsewhere abroad which the next government had to pay back and did so?
§ Lord Callaghan of CardiffMy Lords, that simply is not true.
The Earl of CaithnessMy Lords, my recollection is that the Labour Government did have to go to the IMF.
§ Lord CarterMy Lords, my question concerns the balance of payments. The Minister referred to the strength of our overseas assets. Since the income from those assets is taken into account in the calculation of the deficit on the balance of payments, and since they are largely held in private hands, could he please explain how the strength of the overseas assets can be mobilised to finance some of the deficit on the balance of payments?
The Earl of CaithnessMy Lords, the noble Lord is right when he says that it is taken into account in the calculation. It is interesting to note that the interest, profits and dividends increased from £5.4 billion in 1986 to £5.6 billion at the end of 1988.
Lord Bruce of DoningtonMy Lords, is the noble Earl aware that, although the United Kingdom receives some £12 billion by way of income from investments from overseas, during the same period it also paid out some £7 billion in respect of assets that were held here by foreigners? Is he further aware that there is a very considerable deficit on money held on bank deposits and that in point of fact the net interest paid out on hot money during 1988 was some £2 billion? Since the hot money in the United Kingdom (which really finances the deficit) amounts to some £41 billion at the present time, with a greatly increased rate of interest, does he accept that this itself is having a grave effect on the whole balance of payments situation of the United Kingdom?
The Earl of CaithnessMy Lords, the noble Lord raised some interesting questions which I should be very happy to discuss with him; but we are talking about the net overseas assets.
§ Lord Wyatt of WeefordMy Lords, does the noble Earl agree that all these balance of payments figures are quite ridiculous? Last year the IMF calculated that the world was in deficit with itself by 90 billion dollars, which is obviously an impossibility. These figures are all nonsense because the accounts are not kept properly.
The Earl of CaithnessMy Lords, I do not think that it would be wise for me to pass judgment on that point. However, I think it is worth recalling the very strong position of Britain.
Lord Bruce of DoningtonMy Lords, if there is any deficiency in the keeping of accounts, will Her Majesty's Government accept full responsibility for it?
The Earl of CaithnessMy Lords, I admit that there is a balancing item that has occurred over recent years, but that has come about from the problems of keeping pace with the new financial developments in a dynamic deregulated economy.
147 There are new types of activity and new participants in the financial markets. I can assure the House and the noble Lord that a great deal is being done to try to correct it.
§ Lord Hatch of LusbyMy Lords, let us have the truth in this House. Will the noble Earl refute the allegation made by the noble Lord, Lord Wyatt, that this Conservative Government—or any Conservative Government—had to repay loans that were given to the previous administration; that is, the Labour Government? Will he refute that allegation because it is untrue.