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Balance Of Payments And Reserves

Volume 885: debated on Thursday 30 January 1975

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asked the Chancellor of the Exchequer what are the latest figures for the reserves, and for the balance of payments deficit over the last 12 months.

The level of the official reserves at the end of December was $6,789 million, about £100 million more than at the end of the previous year. The deficit on the current account of the balance of payments in 1974 is estimated to have been £3,730 million.

Despite the slight recent improvement, does my right hon.

Friend agree that we are tackling a Dunkirk situation by "phoney" war methods? When will the Government accept that we need a major curtailment of private consumption, through taxation or other means, particularly of consumption that is expensive in energy and imports, and that we need full employment maintained by a corresponding increase in public expenditure, particularly in house-building and other social services that are not expensive in that way?

I do not agree with the final part of my hon. Friend's supplementary question, and I do not believe that we advance the solution of our problems by the use of tired metaphors from 1940.

Does the right hon. Gentleman appreciate that the converse of the balance of payments deficit is the borrowing requirement? Since the borrowing requirement in the course of six months increased by over £2,500 million, when on the Chancellor's own reckoning the inflation rate was proceeding at 8·4 per cent., will he let the House know the present rate of borrowing requirement? If we are to have a Budget every three months, which is the present going rate, why cannot we have these figures produced much more regularly?

If the hon. Gentleman could give me a firm prediction of the extent of the Opposition's responsibility in increasing public expenditure in the course of six months, I might be tempted to follow his advice.

Is it not time that my right hon. Friend used methods already adopted by other countries, whose deficits are not as bad as ours—namely, to control imports—and also asked the Secretary of State for Defence to reduce the £300 million a year deficit incurred by the British Army of the Rhine in a country which has the largest trade surplus in the world?

I do not believe that our economic prospects would be advanced at this time by controlling imports. Secondly, there is a relationship between the public sector borrowing requirement and the external deficit, but it is noticeable that the Federal Republic of Germany, which in the last year has had the largest external surplus in the world, also expects this year to have the largest public sector deficit in Europe.

Has the right hon. Gentleman any idea of what is happening upstairs in Committee on the Finance Bill? Does he realise that in the Committee the Opposition are pressing that the capital transfer tax should not be brought in, and that by his own admission the capital transfer tax will produce a lower yield than that of the existing estate duty? Therefore, it is the Government and not the Opposition who are pressing measures that will increase the Government deficit in terms of borrowing requirement.

I do not know how far the hon. Gentleman follows the speeches made by his right hon. Friend the Member for Finchley (Mrs. Thatcher), who, if I may use the word, is the hon. Gentleman's mistress in the Finance Bill upstairs and who has stated on behalf of the Opposition that they wish to retain estate duty but to introduce a relief in respect of legacies to wives and spouses, which is part of the capital transfer tax. In that case the revenue from estate duty would be substantially lower than that anticipated from the capital transfer tax. I hope the hon. Gentleman will have the honesty to admit that he misled the House unconsciously in pretending that the situation was other than it is.