Invisible Trade Balance Forecast (Hansard, 23 March 1990)

The Paymaster General (The Earl of Caithness)
My Lords, the latest forecast, published in the Red Book on Budget day, is for an invisible surplus of £ 1–5 billion in 1990.

§ Lord Ezra
My Lords, in view of the deficiency shown for the first time in the invisible account in the fourth quarter of last year which amounted to over £ 700 million, and in view of the forecasts of a nil balance in the first two months of this year, 506 perhaps I may ask this question. How do the Government arrive at a forecast of a positive balance by the year end, bearing in mind that government expenditure overseas appears to be rising; private earnings are being subjected to greater competition and that the continuing relatively high level of interest rates is leading to a negative balance on dividends?

The Earl of Caithness
My Lords, obviously in arriving at our figures the Government take into account a great many factors, some of which the noble Lord has mentioned. However, there were special factors with regard to the fall in the second half of 1989. The fall partly reflected temporary factors. One was the high net Community contributions in the third and fourth quarters resulting from delayed receipts and annual reassessments of the UK contribution in earlier years. That contribution is likely to be substantially lower next year. There were also exceptionally poor insurance figures as a result of recent heavy claims.

Lord Bruce of Donington
My Lords, even on the assumption that the forecast of the noble Earl for the current year is likely to prove to be an accurate one, will he explain how a £ 9 billion surplus on the invisible account in 1986 has now reached a point where, at the moment at any rate, we are about breaking even with only a derisory surplus within the current year? What has happened to the Government's bland statement made by the former Chancellor of the Exchequer relating to "automaticity" whereby any kind of visible trade deficit would automatically be compensated for by an increase in invisible earnings?

The Earl of Caithness
My Lords, the invisible surplus in 1986 to which the noble Lord refers was the highest on record. At that stage the current account was broadly in balance. As the noble Lord said, the subsequent turnaround has been dramatic; but we foresee an improvement.

§ Lord Jenkins of Hillhead
My Lords, does not the noble Earl agree that this Government inherited a 100-year tradition of a strong invisible surplus as well as a 20-year tradition of a visible balance, and that to have dissipated both these within four years when the oil is still flowing strongly is a remarkable achievement? How does the Minister square that with the economic miracle of the 1980s?

The Earl of Caithness
My Lords, the noble Lord tempts me into a long reply which is the subject of a debate in its own right. I know that your Lordships would not appreciate that when we have so much other business to cover later today. There have been a number of factors involved, but I know that the noble Lord will be particularly concerned about the increased receipts to the Community. However, he will also welcome the fact that our net overseas assets rose very strongly in 1989.

§ The Earl of Lauderdale
My Lords, as regards 100-year inheritances, does not my noble friend agree that we inherited a national debt which is now being reduced year by year?

The Earl of Caithness
My Lords, my noble friend is right, but I think we are straying a little far from the Question on the Order Paper.

§ Lord Hatch of Lusby
My Lords, the noble Earl has not answered the second part of the question asked by my noble friend Lord Bruce of Donington. What has happened as regards the rubbishing by the late Chancellor of the Exchequer of the Aldington Report, and the evidence that he gave to us that the projected deficit in manufacturing industry would automatically be made up by a surplus in invisible earnings?

The Earl of Caithness
My Lords, I fear the noble Lord has an advantage over me as I cannot remember who the late Chancellor of the Exchequer was.

§ Lord Boyd-Carpenter
My Lords, is my noble friend aware that, admirable as his replies to questions have been, it is quite unreasonable to expect him or the House to debate these major issues of economic policy on the basis of a Starred Question?

The Earl of Caithness
My Lords, I try to answer whatever questions are put to me; but I agree with my noble friend that we have gone rather wide of the Question on the Order Paper today.