Economy: Overseas Trade Deficit

Lord Haskel Excerpts

Wednesday 25th May 2016 Lords Chamber

Asked by

[Lord Haskel]

To ask Her Majesty’s Government what steps they are taking to reduce the United Kingdom’s deficit on the balance of payments in overseas trade.

[The Commercial Secretary to the Treasury (Lord O'Neill of Gatley) (Con)]

My Lords, changes in investment income are driving the UK’s current account deficit. This has greatly reflected Britain’s attractiveness as a destination for investors. In 2014-15, UKTI provided support for 1,610 of the 1,988 FDI projects in the UK. Government efforts are continuing to help reach the Government’s £1.5 trillion target by 2020. However, the Government’s commitment to eliminating the budget deficit should help to narrow the current account deficit, as forecast by the OBR.

[Lord Haskel (Lab)]

I thank the Minister for that reply, which of course is entirely consistent with government policy over the last five years—funding the deficit by inward investment—but the problem is that it is not working. The current account deficit has become larger in each of the last five years and now stands at a record level of 7% of GDP. Are the Government going to continue with this failed policy or are they going to change it before the deficit becomes unsustainable?

[Lord O'Neill of Gatley]

My Lords, I emphasise, as I tried to do in my opening comments, that the current account deterioration is not being driven by a deterioration in the trade deficit. In fact, our trade deficit has been relatively stable at around 2% of GDP for the last seven years.