Economy: Productivity
Debate between Lord Popat and Lord Vinson
Lord Popat (Con)
My Lords, there are several reasons why our productivity has been a little weak. The good news is that it has gone up by 0.6% in the first quarter of 2014. Yes, we need more investment to increase our productivity. Compared to the G7 countries, a larger proportion of our productivity comes from our active involvement in the financial services industry. We need to encourage more manufacturing. We have the right tools and policies in place for that to happen. It is happening but it will take time to filter through the system.
Lord Vinson (Con)
My Lords, one of the best ways of raising productivity is to increase demand. Unfortunately, the pound is rising so fast that it has now gone well above its purchasing power parity, making it much harder to export and much easier to import, the very converse of what needs to happen. Will the Government continue to look at every possible way of import substitution and, in particular, look at why a trading nation should not have some concern over its rate of exchange, the rate at which it trades? Could they suggest to the governor that he might begin to raise an eyebrow about the high pound and deleterious effect it is having on trade, productivity and, ultimately, employment?
Lord Popat
My Lords, import substitution is not the answer in this very competitive world. As to depreciation of the currency, experience tells us that our currency is worth 25% less than it was at its peak in 2007. Depreciation is not the answer. We should let our currency fluctuate freely in the open market. Experience tells us that a depreciating pound will not result in higher exports.
EU: UK Trading Deficit
Debate between Lord Popat and Lord Vinson
Lord Popat
My Lords, the UK’s current trade balance with the rest of the EU reflects a range of factors. The recent rise in the deficit reflects the shrinking EU market, not a loss of UK market share. The UK is pursuing a range of policies—supporting measures to stabilise and revitalise the EU as well as encouraging firms to internationalise—which will boost UK trade with the EU.
Lord Vinson
I thank the Minister for his very considered reply. Indeed, we must all try harder to export. Does he agree that our relationship with the EU is changing and that the strength of our trading position would be a key factor in any future negotiations? Should it not be widely known that while 3 million of our jobs are reciprocal with our trade with the EU, the continuing £46 billion a year trade imbalance means that overall 4 million of its jobs rely on us? We are indeed its biggest customer. Is this not likely to lead to sensible bilateral trading arrangements similar to those that we have with the rest of the world, as it needs us rather more than we need it?
Lord Popat
My Lords, our trade with the European Union, and the deficit of £46 billion, is counterbalanced by our surplus on invisible trade. Our membership of the EU is still in the best interests of the UK. It provides tariff-free access to a market that is worth around £11 trillion and has half a billion customers, and its trade with the UK enables 3.6 million employers in this country.
UK Trade
Debate between Lord Popat and Lord Vinson(11 years, 4 months ago)
Lords ChamberRead Full debate Read Hansard Text
Lord Vinson
To ask Her Majesty’s Government what steps they are taking to encourage export competitiveness and import substitution in view of the United Kingdom’s trade current account deficit, running at £29 billion in 2011.
Lord Popat
My Lords, this Government recognise that trade is essential if we are to achieve sustainable, balanced growth in the UK economy. That is why we published a trade White Paper providing a long-term strategy for UK trade and an industrial strategy setting out a long-term approach to supporting business. It is why we increased funding to UK Trade & Investment, enabling it to double the number of small and medium-sized firms it supports from 25,000 to 50,000 by 2015.
Lord Vinson
I thank the Minister for his very considered reply and I am sure we all wish him well in his new post. Does he agree that every penny to meet this £10 billion indebtedness has to be borrowed internationally or met by the sale of national assets such as Cadbury, Northumbrian Water, BAA and others, without which the deficit would be much bigger? Would he also agree that we cannot indefinitely trade at a loss and see our borrowing pay for a million jobs in other countries, not least in the EU? Surely, we should start creating jobs at home by buying British, encouraging import substitution and preventing the pound rising to levels that make our exports uncompetitive.
Lord Popat
I thank my noble friend for endorsing my appointment and for giving me the privilege to answer, for the first time, one of his Questions. I turn to the Business Secretary’s foreword to the 2011 trade White Paper, where he says that we must,
“restate the case for open markets”,
and resist,
“the temptation to put up trade and investment barriers”.
I agree that we should take action to support domestic industries, and we are doing this through the growth review and industrial strategy, and by providing help and advice to exporters, in particular our SMEs.