Economy: Balance of Payments and Industrial Productivity

Debate between Lord Flight and Lord O'Neill of Gatley

Thursday 10th December 2015 Lords Chamber

[Lord O’Neill of Gatley]

My Lords, in answering some of these questions, I have to resist the temptation to be a bit of an economics data nerd. First, as I think I pointed out in this House recently, our trade performance has stabilised in recent years. The biggest contribution to the deterioration in our current account balance comes from the so-called invisibles balance, particularly lower returns on our investments overseas.

[Lord Flight (Con)]

My Lords, it is appropriate that the noble Lord, Lord Harrison, should raise the issue of the current account deficit. Many people seem to have forgotten about it. Over the past 15 years it has amounted to some £700 billion and it has been financed by selling the family silver. Even some 50% of buildings in the City of London are now foreign-owned. Would the Minister agree that the issue is essentially macroeconomic? What is needed is a higher savings rate and a higher investment rate. Both have been too low for a long time.

[Lord O’Neill of Gatley]

My Lords, my noble friend is technically correct that the balance of payments current account reflects the difference between our national savings and our national investment performance—one is the reverse side of the other. The best way to improve it is by reducing our domestic savings rate but remaining as attractive as we are to overseas investments.

Income Per Capita

Debate between Lord Flight and Lord O'Neill of Gatley

Tuesday 14th July 2015 Lords Chamber

[Lord O'Neill of Gatley]

My Lords, I am very pleased to hear that one Member of the opposition Benches has read the productivity report in detail. On the specific question, as we showed in the Budget documents and in parts of the productivity document, we believe that when all the measures are looked at in total, eight out of 10 working households will be better off as a result of the personal allowance, the national living wage and the welfare changes announced collectively in the Budget.

[Lord Flight (Con)]

Does the Minister agree with Alistair Darling that the Government subsidising wages tends to depress wages and leads to overemployment, and thus poor productivity growth?

[Lord O'Neill of Gatley]

My Lords, I suggest that Alistair Darling has made many interesting contributions towards improving Britain’s economic performance and productivity performance, including that observation.