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.
Lord Bilimoria
My Lords, I welcome the noble Lord to the Front Benches. I have seen, as the founding chairman of the UK India Business Council, the help that the UK Government give through UK Trade & Investment to businesses to export. However, can the noble Lord tell us what more the Government are doing to help exporting, particularly to BRIC countries, and explain why UK Export Finance levels of finance seem to have fallen and there is very little take-up of new UK Export Finance products?
Lord Popat
The noble Lord asks a very interesting question that covers a wide range of subjects. Let me start with emerging markets. The world has changed; we are repositioning ourselves again and emerging markets are key for us—we give them a special priority. Within those emerging markets are the BRIC countries. I know the noble Lord’s interest and I pay tribute to his work for UKIBC. I was in India two weeks ago with UKTI, our excellent high commissioner in Delhi and a UKIBC colleague of the noble Lord’s. They work with India to make sure that we double our exports there by working with large numbers of corporations both in the UK and in India.
To answer the third part of the noble Lord’s question, insurance is being looked at and reviewed. I agree that we need to make a number of schemes available to our exporters, and it is up to UKTI—as it is well aware—to make the people who export aware of it, too.
Lord Howarth of Newport
I add my welcome to the noble Lord. My Lords, the IMF estimates that fiscal tightening in advanced economies will be 1% in 2013, compared to 0.75% in 2012. The squeeze will be particularly severe in our main export market, the European Union. Against this background of external weakness, how can it make sense for the Government to use fiscal policy to weaken demand in our domestic market as well? Who are our producers to sell to?
Lord Popat
My Lords, we are in an open economy and that is why the Government have come forward with a plan for growth. We want to make sure that we create one of the most competitive tax systems in the G20; we want to make sure that we are open for business and that we welcome inward investment into the UK, and so we will be competitive. The only way to grow is to encourage new businesses, to help existing businesses to grow and to create a climate in which our businesses can do well. However, we cannot help internationally. We are positioned in such a way that we have to work and live in an open economy.
Lord Higgins
I congratulate my noble friend on moving from this Bench to the Front Bench, and wish him well in his new office. I hope he is more comfortable because this Bench is certainly due for refurbishment.
Does my noble friend agree that in the context of this Question the exchange rate is crucial? Has he seen reports over the past week or so of comments made in Germany that there is a danger of an exchange rate war? Does he agree that this would be disastrous for all countries concerned, and that Her Majesty’s Government should do everything possible to avoid such a thing happening?
Lord Popat
I thank my noble friend for those compliments. I am sure there is something that can be done about the Bench. I welcome the noble Lord’s interesting question. We helped to let our pound fluctuate freely in the international market. Although sterling has appreciated by 7% since January 2012, it is still around 23% below the January 2007 peak. All I can say on the exchange rate and the value of sterling is: let the international market decide what the value of our currency should be, rather than it being something we directly influence.
Lord Mitchell
My Lords, on behalf of these Benches I welcome the noble Lord to the Dispatch Box. Even though our politics are different, he and I both come from a business background, and both of us are from north-west London. We also shared the same profession when we studied at night school—we were both waiters. He worked on Kilburn High Street, I worked in Greenwich Village, and I bet I had the better social life.
I want to come back to the BRIC economies—that is, Brazil, Russia, India and China. This country exports more to Ireland than we do to all those countries combined. I ask the noble Lord: what further action we can take to improve our exports to these BRIC countries?
Lord Popat
I thank the noble Lord for those comments. The BRIC countries are very important. As I said earlier, we have a very special relationship with emerging markets, in particular the BRIC countries. Exports to BRIC countries fell by 15% between 2008 and 2009, but grew by as much as 66% between 2009 and 2011. Exports to the BRIC countries now make up 6% of total UK exports. I agree that there is huge potential. My noble friend Lord Green has visited all the BRIC countries twice in the past 18 months to make sure that we have more trade.
The noble Lord is quite right that we do more trade with Ireland than with India. With 1.2 billion customers, we do around £13 billion a year in two-way trade with India. There is huge potential. The Prime Minister himself is putting special emphasis on the BRIC countries and I am sure that over time we will increase our exports to the BRIC countries—which we have already done in the past two years, by 66%, which is pretty good.