My Lords, the UK balance of trade will depend on a number of factors, including the exchange rate and economic performance of our trading partners. This Government will continue to make supporting our exporters a key priority.
Does the Minister agree that it is more than 30 years since our balance of trade was last in surplus and that the policies of successive Governments have been totally inadequate in tackling this fundamental economic weakness? We have no policy on import substitution and we give no incentive to companies to provide their staff with international trade and export qualifications. How can any country achieve long-term economic success and stability if this level of trade deficit continues indefinitely?
I commend the noble Lord for his enthusiasm for exporting, although I think that he does the UK some disservice. We are the sixth largest exporter in the world—the second largest exporter of services. I agree with him that it has not been a key priority for past Governments, but it most certainly is for this Government. With regard to import substitution, while I would not refer to it in these terms, there is for instance the recent announcement by the Prime Minister of a Reshore UK service within UKTI to encourage manufacturers to come back to the UK. That is just one example of the many things we are doing to help our position in the long term on the balance of trade.
The original Question was on the balance of trade, not the balance of payments; they are, of course, two quite different things. The balance of trade is in deficit to around £30 billion; it is a deficit of about 2% of GDP, which is significantly better than under the previous Government, when it was on average 2.5% of GDP. As the UK is growing much faster than its partners it is difficult to forecast exactly when it will come to zero. Certainly the OBR expects to see a significant improvement going forward, but I am reminded of the words of J K Galbraith, who said that the only purpose of economic forecasts is to give astrology a good name.
There has traditionally been a deficit on our balance of trade, but always this has been counterbalanced by a large surplus on our service industries. Will the Minister therefore pay tribute to them, including the creative industries and the City, for ensuring that?
The noble Lord is correct that services have been and remain a very strong surplus for the UK. It has to be recognised that, increasingly, services and goods are becoming intermingled. I know that when Rolls-Royce sells a jet engine, almost half the value is a service. One of the things that we should cease doing to a degree is separating off goods and services, because increasingly they are the same. I commend our creative industries, our professional and financial services, our aerospace sector and, indeed, our growing motor vehicle industry which, of course, is the second largest producer of cars in the whole of Europe.
My Lords, my noble friend has reminded us that this country is a huge exporter of services—I think he said that we are the second biggest in the world. That will increase more and more as information and data will play the key role rather than actual physical products. Free trade in services is what we have not got—particularly in Europe but throughout the world. Will my noble friend reassure us that huge efforts will be made to free up the service trade so that our exports can prosper even more in the future?
I certainly confirm that that is a key priority: both extending the single market to services, which we are pushing for in the EU, and the trade and services agreement, which is a plurilateral agreement between many countries. The UK is championing that. As such a large producer of services, we certainly support both those measures to increase trade.
First, I thank the noble Lord for his contribution to life sciences, which is very much appreciated. The life science sector is hugely important. From pharmaceuticals onwards, the UK has a very strong position. The appointment of George Freeman as the Minister responsible shows how important it is, and the measures taken on R&D allowances and tax relief on the exploitation of IP in the UK will carry on supporting this industry. I was in Boston recently, talking to a number of life science companies that are thinking of coming to the UK.
My Lords, it is the turn of the Labour Benches and then it will be right if we come back over to the Liberal Democrats.
My Lords, does the Minister recognise that in the north-east we still have the highest proportion of manufacturing in the country as part of our economy? However, the large companies there, such as Nissan and now Hitachi, see membership of the European Union as absolutely critical to their ability to trade, particularly with Europe. They want to be in the north-east because of the quality of the workforce and because it is English- speaking, but they want the clear access to Europe. Are not the Government potentially putting this at risk, and will the Minister fight within his Government for this country to stay in Europe?
The north-east, indeed, is one of our manufacturing powerhouses and is part of the UK that actually has a trade surplus with the rest of the world. The Nissan factory is producing more cars than the whole of Italy. I recognise that a number of exporters wish to remain in the EU but I also recognise that they wish to remain in a reformed EU—and that is what we on this side of the House are fighting for.
The Government’s industrial strategy brings together academia, the Government and also businesses in producing a long-term commitment to the next generation of technologies and industries. I know that the motor vehicle industry in particular welcomes this. I mentioned earlier the Reshore UK proposal. These things together are helping significantly, both with companies coming back to the UK and, for instance, companies such as Gestamp, a Spanish company that recently announced a significant investment in the UK.