I am grateful to my right hon. Friend for that answer. Does he agree that the fiscal imperatives necessary for successful manufacturing exports are low inflation, stable exchange rates and low unit costs? Does he further agree that it is necessary and important that those remain at the core of Government policy, and that that is vindicated by the news that in the past three months exports in the manufacturing sector increased by 4·5 per cent. to a new record level?
I am grateful to my hon. Friend, who is right to stress that British exports can do well in competitive markets provided that we keep our inflation down, that it is not merely equal to, but better than the average and that it compares well with the rates of the Germans, French, Japanese and Americans. Unless we do that, we shall not gain our market share. Our manufactured exports have increased our share of world trade in the past three years, so I accept and am grateful for what my hon. Friend said.
Why does the Chancellor of the Exchequer not admit when he talks about exports increasing that imports are also increasing? The latest trend suggests a £9 billion deficit this year on the balance of trade. If the right hon. Gentleman really wants to do something about Britain's export performance, he should cut interest rates by 2 or 3 per cent. and get out of the exchange mechanism.
I do not expect that the current account will be a constraint on growth. Even the figures that the hon. Gentleman mentions, which I do not accept, are a small portion of gross domestic product. The only way that this country can increase exports is by becoming more competititive year by year, by increasing productivity and by keeping increases in earnings and wages down to the levels of our competitors. There are no quick fixes. The idea that we can help this country's economy by depreciating the exchange rate is pure illusion, pure fool's gold. The only way to do that is by improving productivity and competitiveness.
Is my right hon. Friend encouraged by the work of Edinburgh economists, which shows that during the 1980s there was a marked shift in the destination of British exports from third world to more sophisticated markets, which is a good omen for our competitiveness in the 1990s?
My right hon. Friend is absolutely right. Our largest export customer is Germany, our second largest is France and the third largest is the United States. I do not know how people who believe that there is some easy answer through depreciation think that we are going to compete unless we get our inflation rate down to the levels that pertain in those countries.
Will the Chancellor confirm that, although he said that exports are at record levels, imports are at even more record levels and that our balance of payments is showing a record deficit, even in the depths of the recession? Furthermore, our share of world trade in major manufactures is less than it was in 1979. Do the Government propose to do anything at all about that?
Our imports have risen, but some pick-up in imports is certainly expected as the economy recovers. I repeat what I told the hon. Member for Bolsover (Mr. Skinner): any prospective current account deficit is of a size that can be easily financed. The only way that we can increase our share of world trade is by becoming more productive and more competitive. The hon. Lady does no one any service by pretending that there is some easy way out.