UK Trade Deficit (Hansard, 20 October 2004)

§ The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)
My Lords, in the year to the second quarter of 2004, the UK trade deficit was 3.3 per cent of gross domestic product, comfortably below the 4.1 per cent of GDP seen in 1989. Moreover, the current account deficit was 2.1 per cent of GDP, less than half the peak of 5.1 per cent of GDP in 1989.
The Government are committed to free trade and fighting trade protectionism and have put in place a range of measures aimed at boosting productivity and 771 competitiveness. This is the best way to ensure that the UK economy is equipped to meet the challenges and exploit the opportunities of the global economy.

§ Lord Roberts of Conwy
My Lords, the noble Lord has of course put the position in its very best light. However, does he agree that the Government should give higher priority to developing an overall strategy to reduce the trade deficit? This year alone, the goods sector will probably result in a deficit of some £60 billion and the deficit is likely to increase year by year as oil runs out and as manufacturing declines? Is not the best way to deal with this by way of an overall strategy, rather than short-term, hand-to-mouth policies which go nowhere to meet the global economic challenge?

§ Lord McIntosh of Haringey
My Lords, the original Question was about the trade deficit and I acknowledge that the goods deficit is a significant part of that. However, I certainly reject any suggestion that we are not taking the issue seriously. The key to reducing the goods deficit, as any other deficit, is our competitiveness in the world economy. That is why the measures we have taken to increase competitiveness—for example, in the Enterprise Act, with R&D tax credits and with our low corporation tax limits—are important and continuing.

§ Lord Dykes
My Lords, will the Minister mind if I call his Answer "complacent", bearing in mind that the UK appears to suffer from persistent and often chronic deficit and has done so for many years? Should not the Minister be addressing his attention to the comparison between core EU countries, such as France and Germany, and others which now have enormous surpluses and export booms, and does not that show that years ago the Government should have taken us into the euro as a leading successful financial and investment currency?

§ Lord McIntosh of Haringey
My Lords, I wondered where that was leading. My friend, the noble Lord, Lord Roberts, says that I am putting the best face on it while my opponent, the noble Lord, Lord Dykes, says that I am being complacent. No, I do not believe it follows that the implication of our deficits is that we should now be going into the euro. The Chancellor has taken a principled and well-documented decision on this matter.

§ Lord Tomlinson
My Lords, as my noble friend emphasised so seriously the need for competitiveness, will he give us his view on the report of Mr. Wim Kok, the former Prime Minister of the Netherlands, concerning the lack of attainment in relation to the Lisbon agenda. This House has previously drawn attention to the frequency with which we commit ourselves to the Lisbon agenda but fail to attain its 772 goals. Is not that failure, which Wim Kok has reported, a sign that the policy on competitiveness still has a substantial way to go?

§ Lord McIntosh of Haringey
My Lords, I would love to take part in a debate on these matters. I do not believe that Mr. Kok was referring to the UK trade deficit in his report.

§ Baroness Noakes
My Lords, does not the Minister accept that there is a link between competitiveness and the trade deficit? We have had a trade deficit every month since January 1998 and competitiveness has continued to slump even on the DTI's measures. Will he not accept that the Government are taxing and regulating British business out of the world market?

§ Lord McIntosh of Haringey
My Lords, I was the one who said that competitiveness was linked to trade deficit. Of course it is. We have had trade deficits in many years, under both Labour and Conservative governments. I have all the figures in front of me, but I shall spare your Lordships. Any attempt to turn this into a party historical point will not get very far.

§ Lord Pearson of Rannoch
My Lords, does the Minister agree that our trade deficit with the countries of the euro-zone is substantial, standing at perhaps record levels? If so, do the Government also accept that this means that the countries of the euro-zone have many more jobs dependent on their trade with us than we have dependent on our trade with them?

§ Lord McIntosh of Haringey
My Lords, I agree with one of the premises and not with the conclusion. I agree that we have a serious deterioration in our trade deficit with the European Union. It is matched by an increase in real effective growth in sterling against a basket of currencies. It is caused largely by higher UK growth, which means that there is an increase in imports from the European Union countries. That does not lead us to the conclusion of the noble Lord, Lord Pearson.

§ Lord Rosser
My Lords, is my noble friend managing to keep a straight face while listening to homilies from the Opposition Benches on, of all subjects, how to manage the economy? Is it not a bit like being lectured by King Herod on child care?

§ Lord McIntosh of Haringey
My Lords, I never allow levity to enter my answers.

§ Lord Greaves
My Lords, is it not the case that the trade deficit is intimately related to the long-term decline of manufacturing industry? Would the Government not have to spend far less on dealing with the effects of such a decline in areas such as west Cumbria or east Lancashire, where I live, in remedying the housing market collapse or the resultant social problems if much more attention were given to the health and growth of the manufacturing sector?

§ Lord McIntosh of Haringey
My Lords, again, I agree with the noble Lord, Lord Greaves, about the decline in manufacturing industry, and I have already referred to that. But I do not think that it is for lack of attention by the Government. I am afraid that this is a phenomenon which is happening in developed countries all round the world. I have already indicated the extent to which our policies on competitiveness are designed to fight that trend.

§ The Countess of Mar
My Lords, can the Minister say whether he considers the level of imports of food products and food from developing countries and other European countries to be satisfactory in view of the decline in British agriculture, which was once the most efficient in the world?

§ Lord McIntosh of Haringey
My Lords, I do not think I would say that I am satisfied, but, again, I think that an analysis of the reasons for that, including the efficiency of British agriculture, is a little wide of the Question, although one of my colleagues would be delighted to debate it with the noble Countess, Lady Mar.