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Overseas Assets: Revenue

Volume 490: debated on Thursday 3 December 1987

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3.13 p.m.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government what is the United Kingdom's holding of overseas assets and how much revenue is derived from these assets.

The Parliamentary Under-Secretary of State, Department of Transport
(Lord Brabazon of Tara)

My Lords, the level of net overseas assets held by United Kingdom residents increased to £114 billion at the end of 1986, second only to Japan's. These assets yielded annual net earnings of over £44½ billion in 1986.

My Lords, in thanking my noble friend for that very heartening reply may I ask this question? Is it not the case that our overseas assets and trade in services are making an increasingly important contribution to the balance of payments of the United Kingdom?

My Lords, my noble friend is quite right. In 1986 our invisible earnings were the largest in the world with a surplus of £7·75 billion in the year annualised for the first half of 1987. The prospects are equally good in the performance of invisible earnings again this year. The surplus is expected to rise further to £8·5 billion in 1988.

My Lords, the noble Lord may not be able to give the answer to my question now. If I put down a Question for Written Answer, can the noble Lord split the various assets and revenues into the countries from which they emanate so that we can get some idea as to the spread?

My Lords, if the noble Lord puts down a Question for Written Answer to that effect, I shall do my best to find the answer. At the moment, I cannot say whether those figures are available.

My Lords, may it not have been wiser to invest a substantial proportion of the billions emanating from North Sea oil in the rehabilitation of our industries and major towns in this country rather than investing it in overseas assets? The value of these assets is decreasing by leaps and bounds.

My Lords, a good deal of money has been invested in the rehabilitation of our industries. Investment in manufacturing industry is currently at a very high level. The overseas assets now held by citizens of the United Kingdom are extremely valuable and they will be very useful in the years to come.

My Lords, assuming I have done the sums correctly in my head, is it the case that these overseas assets are earning less than 4 per cent. per annum in real terms? Is that not below what one would expect the normal rate of return to be from investment in British industry?

My Lords, the yield of £4·5 billion annualised on the first half of 1987 is expected to rise to £5·2 billion. I do not believe that is a bad return on investments compared with what can be obtained in the United Kingdom.

My Lords, is my noble friend aware of the old adage that trade follows investment? Therefore, the real value of these investments is far greater than the return indicated by the noble Lord, Lord Peston. An enormous amount of trade is derived from the fact that we have investments overseas. People travel back and forth and generate that activity.

My Lords, my noble friend is right. In my answers I have tried to imply the importance that we attach to these assets.

My Lords, can the noble Lord tell the House what is the foreign investment in this country in comparison with the overseas assets of the citizens of this country to which he has just referred?

My Lords, the figures that I have been giving are net assets. That is overseas assets with overseas liabilities deducted. I am not sure whether I have available the two figures which make up the net assets which I have given.

My Lords, that does not answer the question. I was not talking about net assets overseas. I was asking the noble Lord whether he can tell the House what is the figure of foreign investment in this country in comparison to overseas assets held by citizens of this country?

My Lords, I now have the figures. The gross overseas assets held by the United Kingdom were £731 billion. Gross liabilities amount to £617 billion. That answers the question from the noble Lord.