To ask the Chancellor of the Exchequer what is the latest trend in the balance of trade in manufactured goods.

The deficit in the United Kingdom's trade in manufactures is clearly on a downward trend. In the three months to January 1991, the deficit was£1½ billion, or 1 per cent. of GDP, compared with a peak deficit of £4¾ billion, or 3¾ per cent. of GDP, in the third quarter of 1989.

Does my right hon. Friend agree that those figures show a significant improvement and are part of an encouraging trend? Is not that because of the underlying strength of manufacturing industry which, during the lifetime of the Government, has improved productivity, the quality of goods and delivery times? Would not it be more appropriate to cheer on those companies that sell abroad rather than disparage them, as the Opposition do?

I entirely agree with my hon. Friend. There has been an encouraging trend in manufactured exports. As my hon. Friend knows, our share of world trade in manufactures has been broadly stable in the past few years and increased last year. We expected a further increase. Certain sectors have dramatically increased their exports, particularly the motor industry, which increased exports by 50 per cent. That is a remarkable achievement.

Is it not clear that, as anyone who knows what is happening in the manufacturing industry, let alone the high street, will confirm, firms are all busy reducing their stocks and that, as they do so, one might have expected a dramatic decline in imports of manufactured goods and imports generally? The fact that that has not happened to anything like the extent expected is a serious matter to which the Chancellor should address himself minutely.

I agree with the right hon. Gentleman that the behaviour and control of stocks is extremely important. The control of stock levels in British industry is one of the many ways in which British management and industry have improved dramatically in the past decade. The real fall in imports shows that the sharp move into a profound deficit in the current account was the product of excess demand in 1987 and 1988.

Does my right hon. Friend accept that the strength of manufacturing industry is a good sign of the strength of a country's economy? Does he accept that our manufacturing base is far too small, is continuing to decline, and that unless it is regenerated, the prospects of prosperity and a sound economic future for this country are grim?

I agree with some parts of my hon. Friend's question—manufacturing is an extremely important part of the economy, although not the only one. It is important for our external trade, which is why the Government are keen to encourage it.

Mr. John Smith:

Does not the Chancellor of the Exchequer think that it is alarming that the Government predict a fall of 7 per cent. in manufacturing investment this year?

The right hon. and learned Gentleman should recognise that there has been an increased boom in recent years in this country, and investment is at a high level. Business investment in this country has improved dramatically—by more than 40 per cent. in the past few years. It is not surprising that when the economy slows down, investment falls from its former high level.